Long-Time CEO of California-Based CU Accused of $40 Million Embezzlement
Feds say Edward Rostohar’s inside knowledge as a former NCUA examiner enabled him to conceal his massive fraud scheme for 20 years.
Edward Martin Rostohar, a long-time president/CEO of the CBS Employees Federal Credit Union, is in jail awaiting an April 18th court hearing where he will be charged with embezzling $40 million over two decades.
He allegedly spent the Studio City, Calif-based credit union members’ funds on gambling, expensive cars, private jet travel, and a Reno, Nevada business and home, according to court documents and federal prosecutors in Los Angeles.
On March 12, the credit union informed Rostohar, a former NCUA examiner, that he had been suspended from his job after an internal investigation uncovered irregularities in the performance of his job duties. According to court documents, Rostohar’s wife called 911 later that day, telling police that her husband was leaving the country because he stole money from the credit union.
After authorities took him into custody, the 62-year-old Rostohar admitted to the massive embezzlement scheme that lasted for 20 years.
Before joining CBS Employees FCU 30 years ago, Rostohar worked as an examiner for the NCUA. He told investigators that this background gave him the knowledge for what NCUA examiners look for when examining credit unions, enabling him to avoid detection of his fraud, according to court documents.
Rostohar also told investigators he gambled away much of the money and spent the rest on traveling by private jet, buying expensive watches, and giving his wife a weekly allowance of $5,000. He also bought two cars – a Porsche and a Tesla – with money he pilfered from the credit union, according to court documents.
The former executive also admitted to starting a business in Reno, Nevada in December 2018. He wrote tens of thousands of dollars of checks to himself to cover the company’s costs as well as to pay a $5,000 monthly mortgage on a home in Reno he recently purchased, federal prosecutors said.
According to court documents, Rostohar began stealing to pay the monthly balances on his personal credit cards with funds from the credit union’s online accounts or by forging checks, and later by forging his coworker’s signature on credit union checks and depositing them into his personal accounts.
Rostohar estimated he stole $40 million from the credit union, according to court documents. Investigators also reported that an NCUA examination up to Feb. 28 showed a potential loss of $40,541,130.
The credit union had $21 million in assets, $9.4 million in investments, $2.6 million in capital and $8.6 million in deposits at other banks, according to the CBS Employees FCU’s December 2018 Call Report. The credit union’s financial performance reports filed with the NCUA over the last five years show the California credit union was well-capitalized and did not post any financial losses.
The alleged fraud was finally exposed on March 6 when a credit union employee found a $35,000 check made payable to Rostohar, but the check did not include an explanation for the high dollar amount, according to court documents.
The employee then reviewed the credit union checks posted since January 2018 and discovered $3.7 million in checks were made payable to Rostohar The checks, however, were forged with the signature of another employee without that employee’s knowledge or consent, federal prosecutors said.
The FBI and the Los Angeles Police Department said an investigation is ongoing.
Rostohar has been charged with two felony counts of bank fraud and aggravated identity theft. If convicted on both charges, he faces a maximum sentence of 30 years in federal prison and a $1 million fine on the bank fraud count and a mandatory consecutive term of two years in federal prison on the aggravated identity theft count.
Late Friday, the NCUA said it liquidated CBS Employees FCU after determining that it was insolvent.
The credit union’s assets, loans and member shares were assumed by the $654 million University Credit Union in Los Angeles. Chartered in 1961, CBS Employees FCU served 2,798 members.
CBS Employee FCU employed five full-time staffers.