Former Minnesota CEO Sentenced to Eight Years for $2.5 Million Fraud

A federal judge sentenced former CEO Margurite Mary Cofell to eight years in prison for embezzling more than $2.5 million that led to the liquidation of the $51 million St. Francis Campus Credit Union in Little Falls, Minn.

U.S. District Judge Wihelminna M. Wright in Minneapolis on Tuesday also ordered the 62-year-old Cofell to pay $2,513,360 in restitution and to serve five years of supervised release following her prison sentence.

Federal prosecutors recommended a prison sentence of 11 years and three months arguing that any mitigation warranted by Cofell’s lack of criminal history —- before she pleaded guilty to one count of credit union fraud in April last year —- should be weighed against the long-term scheme she executed at SFCCU by making thousands of transactions to conceal her crime and the significant financial losses that destroyed the credit union, which left employees jobless and the Little Falls community devoid of the financial institution that it served for more than 50 years.

What’s more, because of Cofell’s fraud the National Credit Union Share Insurance Fund incurred losses of $13,702,772, federal prosecutors reported in court documents.

Cofell’s defense attorney was seeking a prison sentence of six years.

“While not diminishing the seriousness of her offense, it is equally important to look at her as a whole person, as someone who otherwise had led an exemplary life and law-abiding life, as someone who people care a great deal about, as someone who people say good things about,” Attorney Douglas Olson wrote in a sentencing memo for the court.

However, the facts show that from June 2006 through January 2014, when she was fired, the former CEO diverted the credit union’s funds and deposited that money into her accounts, member accounts and the accounts of family members and close friends, federal prosecutors said in court documents.

She used accounts of unwitting credit union members to create fake loans and used that money to conceal fictitious deposits to member accounts, purchase credit union checks or fund the unauthorized removal of cash from the credit union.

On other occasions, Cofell used money from fraudulent loans to make payments on existing loans that were delinquent and to make payments on loans held by members with whom Cofell had personal relationships, according to court documents.

Federal prosecutors also said the former executive made unauthorized cash withdrawals from the credit union’s vault account.

An NCUA civil lawsuit filed in Minneapolis federal court in 2017 alleged that she embezzled $2.8 million over 15 years. However, Cofell allegedly began stealing from the credit union in the mid-1990s, which led to a total loss that likely exceeded $10 million, according to a forensic auditor’s report filed with the lawsuit.

Even when the former CEO in 2014 admitted in writing after confronted by NCUA examiners that she began her fraudulent scheme 15 years ago, a forensic auditor (Ohio-based Lillie & Company) later hired by the independent federal agency was only able to obtain complete transactional documentation from 2011 to 2014 because Cofell allegedly destroyed the data processing system’s back up information prior to 2011, according to NCUA’s civil lawsuit.

“It appears as if Ms. Cofell was engaged in a scheme to defraud the credit union from at least the mid-1990s up to the time at which when she was suspended on Jan. 23, 2014,” according to court documents. “While Ms. Cofell purged much of the earlier financial detail, member statements in connection with a number of fictitious accounts showed the existence of fictitious loans well in excess of $1 million as of 2000 thereby suggesting that the scheme had been ongoing for some time prior to 2000.”

Cofell has denied these allegations made in the NCUA lawsuit, which is suing her for $2.8 million.

“Cofell admits that there was an examination by the NCUA on January 23, 2014 and that NCUA initiated an investigation at that point,” Cofell’s lawyer wrote in answering the NCUA’s allegations. “Cofell lacks knowledge or information sufficient to form a belief about the truth of the allegation regarding the forensic report by Lillie & Company.”

She also denied the NCUA’s allegations of civil theft, fraud and misrepresentation, unjust enrichment, conversion and failing to perform her fiduciary duty.

In January, the NCUA and Cofell’s lawyer agreed to place the lawsuit on a court-approved stay, which suspends the legal proceedings.