Longtime Member Sues CBS Employees FCU’s Board & Supervisory Committee

In 1970, Victor Webb of Los Angeles opened an account at the CBS Employees Federal Credit Union that had been chartered just nine years earlier to serve the financial needs of the national television network and Mary Tyler Moore Productions.

Forty-nine years later, Webb is suing the credit union’s board of directors and supervisory committee members for $40 million because they neglected to perform their fiduciary duties and failed to supervise former CBS Employees FCU President/CEO Edward Rostohar. He is scheduled for sentencing in September after pleading guilty to bank fraud in a 20-year embezzlement scheme that bilked more than $40 million from the Studio City, Calif.-based credit union that had $21 million in assets.

Webb filed a class action complaint in Los Angeles Superior Court on Aug. 9, which also names the $727 million University Credit Union as a defendant. The Los Angeles credit union assumed the assets, loans and member shares of CBS Employees FCU after it was liquidated by the NCUA.

Under California’s financial code, Webb claimed in his lawsuit that UCU is liable “to the same extent as the CBS Employees FCU board and its supervisory committee.”

Webb’s account with CBS Employees was current at the time of his 2014 retirement. When his account was transferred to UCU, he had a positive balance in his savings account.

However, Webb alleged in his lawsuit that because of Rostohar’s massive embezzlement scheme, the longtime credit union member was not able to benefit from lower fees or higher interest returns on his savings account because there was less excess revenue in the credit union.

Webb is suing the board and supervisory members for negligence, breach of fiduciary duties, gross negligence, breach of duty to supervise and successor liability involving UCU.

The board members were Douglas Edwards, chair, Marilyn Fischer, vice chair, Marsha Miller, board treasurer, Clara Schwartz, Lynn Altman, Lisa Schwartz, Marian Turnbull, Yvette Pappalardo and Paranee Thiagarajah.

The supervisory committee members included Carol Wackeen, chair, Sarah Xu and Cima Baker-Lawson.

Rostohar’s fraud was finally detected on March 6 when a credit union employee found a $35,000 check made out to Rostohar, which led the employee to uncover $3.7 million in checks made payable to the former CEO.

As he was backing out of his driveway at his Studio City home on March 12, Los Angeles police apprehended Rostohar who was carrying a passport and $275,000 in cash, precious metal coins and bars in the trunk of his 2018 Porsche.

Before he joined CBS Employees FCU 30 years ago, the 62-year-old Rostohar worked for several years as an NCUA auditor. That work experience enabled him to conceal his fraud for years, according to FBI investigators.

Authorities are in the process of possessing some of Rostohar’s real estate assets in Studio City and Reno, Nev., estimated to be worth at least $3.5 million.

He also agreed to hand over a café, additional properties in Washoe County, Nev., resort property in Mexico, luxury cars and watches, jewelry, and at least eight bank accounts, three retirement accounts and one annuity account. Court documents did not disclose the total estimated value of these assets.