Federal Judge Rules $1.8 Million Restitution Must Be Paid by Former CU CEO

A week after Fuataina Afutiti walked out of a Michigan prison in October 2020 for embezzling more than 65% of the assets of a now-defunct Detroit credit union, she filed for bankruptcy.

Persons unable to pay back their debts file for Chapter 7 bankruptcy, which discharges their debts. Although federal law prohibits discharging court-ordered restitution, the NCUA nevertheless had to file a complaint in January to determine whether the restitution she owed could be discharged. The former CEO of the $3.3 million Veterans Health Administration Credit Union embezzled $2,215,032 from the financial cooperative that served local veterans and their families.

In March, U.S. Bankruptcy Judge Maria Oxholm in Detroit issued a default judgement in favor of the NCUA that the restitution could not be discharged, which requires Afutiti to pay $1,887,625. The federal agency won the default judgement because Afutiti or her lawyer never filed any motions to challenge NCUA’s complaint.

After the former 20-year CEO pleaded guilty to embezzlement in December 2016, a state court judge ordered Afutiti to serve a minimum sentence of two and a half years to a maximum sentence of 20 years in prison. She was also ordered to pay restitution.

She entered state prison in January 2017 and was discharged on Oct. 2, 2020, serving two years and 10 months.

Along with its complaint to determine whether the restitution could be discharged, the NCUA filed a five-page document that explains how Afutiti stole the credit union’s funds and concealed her embezzlement for years. This document was not  publicly disclosed or available during her 2016 case, which was prosecuted by then Michigan Attorney General Bill Schuette.

Afutiti was misappropriating the credit union’s funds through VHACU’s cash ordering process. While the credit union’s corporate statements noted many instances when credit union cash deliveries were completed, the appropriate entries in the credit union’s general ledger to record the funds that were received and placed into the vault were not always posted, according to the NCUA.

Instead of making the proper general ledger entries, Afutiti would sometimes debit other general ledger accounts to hide her theft. This enabled her to steal cash without causing an identifiable out of balance condition between the cash in the vault and its corresponding general ledger account for the vault’s cash.

To conceal the increasing amounts of cash unaccounted for, Afutiti used other general ledger accounts to offset the credit entries posted to the corporate account. According to the NCUA, the former CEO was hiding her embezzlement from examiners, credit union officials and outside auditors in various general ledger accounts including the ACH settlement account, the ATM, and service center settlement accounts and shares.

Afutiti admitted she withdrew $583,536 from share accounts to hide a large amount of cash that she already embezzled. After withdrawing shares from member accounts to help balance the credit union’s financial statements, she replaced the shares back into members’ share accounts after she created phony financial statements for the board of directors, examiners, auditors and members.

When the credit union was liquidated in March 2016, a total of $2,215,032 was missing, according to the NCUA. However, the federal agency indicated that Afutiti may have embezzled more than that.

“It is unfortunate that there is no way for us to document the full amount of funds misappropriated from the credit union due to the absence of records going back far enough as to when the misappropriation of credit union funds first started,” the NCUA said in its court document.