Documents Reveal New Fraud & Corruption Allegations at MCU

Court documents for the first time revealed new details and allegations of widespread fraud and corruption that occurred at the $3.2 billion Municipal Credit Union and involved its CEO, at least five top executives, two supervisory committee members and 13 former board members. It led to more than $18 million in financial losses and $109 million in write-down losses.

New reporting that will be published in the July 8 print edition of CU Times will show that the court documents came from a lawsuit filed in Wisconsin federal court in May by the conserved credit union and the NCUA. They are suing CUMIS Insurance Society because the Madison, Wis.-based organization is refusing to pay a $9.8 million interim insurance claim to cover some of the losses from former MCU President/CEO Kam Wong’s fraud. He was sentenced in June 2019 to five and a half years in prison after he pleaded guilty to embezzling nearly $10 million from New York City’s oldest financial cooperative.

One former MCU board member, Mark Brantley, who responded to CU Times, said the lawsuit’s allegations against him are false. In a separate lawsuit filed by Brantley in federal court late last year, he made several fraud, defamation and professional malpractice allegations against the NCUA, the New York Department of Financial Services and Eisner Amper LLP, one of the nation’s largest accounting firms that was responsible for MCU’s auditing and financial reporting. The state regulator and accounting firm have asked a federal judge to dismiss the lawsuit based on legal protections and case law. The NCUA is expected to answer Brantley’s lawsuit in mid-July.

In February 2018, after learning of a federal criminal investigation targeting Wong, MCU formed a special committee to oversee an internal investigation, which determined the former CEO actually embezzled $13.9 million, according to the NCUA/MCU’s lawsuit against CUMIS.

What’s more, the lawsuit alleged additional embezzlement losses that totaled more than $4.3 million occurred because of “dishonest acts” of former board members; the chief human resources and labor relations officer, Kim Thompson; an executive office operations manager, who was not identified in court documents; former Supervisory Committee Chair Giovanni Porcelli; and another former Supervisory Committee Chair and the head MCU’s Fraud and Security Department, Joseph Guagliardo, a retired New York City police officer and a certified fraud examiner.

As the chief HR officer, Thompson’s alleged dishonesty caused $2.5 million in losses. MCU’s investigation learned that she allegedly used the credit union’s funds to pay for housing expenses and make personal credit card payments.

Separate and independent accounting practices, described in court documents as “dishonest,” caused the credit union to suffer more than $109 million in write-down losses, or what the lawsuit alleged as “accounting misfeasance losses.”

MCU’s investigation discovered its former Chief Credit Officer Norman Kohn allegedly and knowingly allowed the use of inaccurate information to inflate the credit union’s pension performance. This resulted in MCU sustaining write-down losses in excess of $93 million.

Kohn was appointed MCU CEO after Wong was fired. Kohn did not respond to CU Times‘ request for comment.

Court documents also showed that the conduct of MCU’s former CFO Linda Lambert allegedly facilitated Wong’s embezzlement, but no details were given.

Nonetheless, Lambert allegedly inflated MCU’s investment portfolio by failing to expense the premium on bonds payable, which caused the credit union to suffer write-down losses of $5.2 million.

Lambert could not be reached for comment.

Additional details and allegations of the MCU fraud case will be revealed in the July 8 print edition of CU Times.