Helicopter view of Coney Island where MCU announced a branch closure. (Source: Shutterstock)
The negative fallout from its massive fraud and corruption cases continues for the $2.9 billion Municipal Credit Union in New York, which used a positive spin in announcing six branch closings by the end of the month.
But the announcement is more likely an attempt to slow or stem the credit union's financial problems after posting huge net income losses in the last two quarters and losing more than 17,000 members in the months after former President/CEO Kam Wong was sentenced to five years in prison for stealing nearly $10 million. His case led to federal charges against the credit union's former board chair and a supervisory committee member.
"In an effort to streamline our operations and serve our members more efficiently, we will close six branches on January 31, 2020," MCU said in a prepared statement in December. "The following locations will close on January 31, 2020: Coney Island, East Meadow, East Side, Melville, Oceanside and Yonkers."
The announcement posted on MCU's website homepage made no mention as to why these branches were targeted for closing. The statement also did not address how many employees would be affected by the branch shutdowns, whether they would be laid off or reassigned to the remaining 16 branches throughout New York City.
Interim President/CEO Kay Woods did not respond to CU Times email and phone messages requesting additional information about the branch closings. The NCUA, MCU's conservator, declined to comment. The credit union has been under the NCUA's conservatorship since May 2019.
The Bklyner, a news site that covers Brooklyn, reported that public reaction to the Coney Island branch closing has been negative.
"My office knew nothing about this and what is even more appalling is that it is happening on city-owned land that was rezoned in 2009 to make way for 'revitalized' Coney Island," New York City Councilman Mark Treyger, who represents the neighborhood, told the news site.
The news site also quoted other public officials and two MCU members who noted the branch closing would also mean the neighborhood would be severely underbanked and would create a big inconvenience for members who have depended on the branch for their banking services.
The branch closings may be one of the steps MCU is taking to slow or stop the bleeding of its massive net income losses. MCU posted a net income loss of $113 million at the end of the third quarter compared to a $19.6 million income gain at the end of last year's third quarter. In the same time frame, the credit union's net worth has plummeted from 8.26% to 3.87%, making it significantly undercapitalized according to the credit union's Call Reports and financial performance reports filed with the NCUA.
Fourth quarter numbers have not been posted yet by the independent federal agency.
However, the credit union's average salary and benefits of its full-time employees has soared from $118,403 at the end of the 2018's third quarter to $369,498 at the end of the 2019's third quarter. At the end of last year's second quarter, that number topped $434,688, according to NCUA financial performance reports. The peer average is $83,322.
In addition to MCU's interim CEO, there are at least five interim senior executives, according to a database of Callahan & Associates' Credit Union.com.
Other MCU senior executives, Jane Dobbs and Lisa Hay, are not listed as interim executives. Dobbs is executive vice president, who previously served as President/CEO for the $184 million Canyon State Credit Union in Phoenix, Ariz., and Lisa Hay is MCU's chief operating officer, who previously worked as a national credit union consultant, according to her LinkedIn page.
What's more, MCU's operating expense to gross income ratio, which measures the institution's key efficiency ratio has soared from 81.49% in Sept. 2018 to 151.64% in Sept. 2019, according to NCUA financial performance reports. The credit union's efficiency rate hit 210.76% at the end of June 2019. Its peer average is 61.96%.
Since MCU has been rocked by corruption scandals, it has lost more than 17,000 members.
The federal investigation that convicted Wong led to criminal charges against Sylvia Ash, a judge of the Kings County Supreme Court and former MCU board chair. She pleaded not guilty in November to conspiracy to obstruct justice, obstruction of justice for falsifying records and obstruction of justice to tampering with a witness, victim or informant connected to Wong's federal investigation.
Additionally, Joseph Guagliardo, a retired New York City cop and former member of MCU's supervisory committee, was charged separately with embezzlement, fraud, and controlled substance offenses arising from abuse of his position as a member of the supervisory committee.
An indictment of charges against Guagliardo has not been filed yet because court documents indicate he is in plea deal talks with federal prosecutors.
After the allegations were made against Ash and Guagliardo, Geoffrey S. Berman, United States Attorney for the Southern District of New York, said these charges reflect the latest in "our ongoing work to uncover criminal conduct at the highest levels of MCU.
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