Former CU Service Center Co-founder Sentenced for $1M Embezzlement

While greed and personal enrichment have motivated many credit union executives convicted of embezzlement, Joan “Joni” Brown stole more than $1 million to keep her management company and the six credit unions it served afloat.

U.S. District Court Judge Joshua Wolson in Philadelphia sentenced Brown, 80, of Bristol, Pa., last week to three years and eight months in prison, and five years of supervised release. She also was ordered to pay $1,016,900 in restitution. Brown is scheduled to begin her prison sentence in July.

Originally indicted on six felony counts of embezzlement, 11 felony counts of making false entries in credit union reports and five counts of aggravated identity theft, Brown pleaded guilty in September 2020 to the embezzlement and making false entry charges, while prosecutors agreed to drop the aggravated identity theft charges.

In April 2016, the NCUA shuttered six Philadelphia area credit unions because of their insolvency. Service Center for Credit Unions Inc. based in Bensalem Township, Pa., which Brown cofounded with three other individuals in the 1980s, was providing these credit unions with management services, including accounting services.

Starting in 2010 and through 2016, Brown embezzled more than $1 million, which was drawn on accounts of Cardozo Lodge FCU; O.P.S. Employees FCU; Chester Upland School Employees FCU; Triangle Interests FCU; Electrical Inspectors FCU and Servco FCU.

The checks, made payable to Brown’s company, were signed by her and deposited into SCCU Wachovia Bank/Wells Fargo bank accounts.

Brown and her business partner, Patricia Smith, began falsifying CDs in 2010 to account for the stolen funds that prosecutors and Brown’s defense attorney said were used to keep SCCU and the credit unions operating. The fraudulent CDs totaled $2,809,734, according to court records.

“While Ms. Brown did not make any vast profit from her embezzlement, her actions allowed her to continue in her role of running these credit unions and keep an undeserved sterling reputation in the industry for a significant period of time,” prosecutors wrote in their sentencing memo. “Representatives from each of the victim credit unions have stated that, while the credit unions were reimbursed by CUMIS Insurance Society, the Fidelity Bond insurance carrier for the six credit unions, the credit unions were liquidated and they each expressed their shock and feeling of betrayal as a result of learning of Ms. Brown’s conduct, noting how much trust had been placed in her. Indeed, she had been described in the past as the face of credit unions in Philadelphia.”

Brown’s defense attorney, Maranna J. Meehan, wrote in court documents that there should be no suggestion that Brown lived beyond her means or spent the money on a lavish lifestyle. Meehan noted that one victim, who was good friends with Brown for 15 years, told investigators: “I honestly don’t think she personally gained from it … she used the money to keep the business afloat.”

According to Meehan, the purpose of falsifying the CDs was to ensure the credit unions had sufficient funds for the members to borrow money. Some of the credit unions had no liquidity or cash and other credit unions had more cash on hand. Often, the credit unions did not have the capital to make loans and Brown took money from the credit unions, deposited the money into SCCU’s bank accounts and shifted the funds to other credit unions.

Although SCCU charged the credit unions for Brown’s services, her company also had chronic financial woes, according to court documents.

Nevertheless, because of the need for the sentence to reflect the seriousness of Brown’s crimes, promote respect for the law and provide just punishment, prosecutors recommended a prison sentence of eight to 10 years for the former executive. Meehan, however, argued for no prison time because of the non-violent mitigating factors of the case, and Brown’s age and health issues.

According to prosecutors, after Brown’s business partner Patricia Smith died in 2013, Brown continued to falsify CDs. Some CDs were legitimate, but most were not. When a credit union needed money, she “made it up” by changing the renewal date on a CD. When all account balances got low, she falsified another CD.

Smith originally produced the fake CDs on a computer, while Brown manually cut and pasted the CD documents to appear authentic. She also prepared the credit unions’ quarterly NCUA Call Reports, which falsely represented the investments’ assets. No one else at SCCU was involved in the fraud scheme, prosecutors said.

Brown managed to conceal her embezzlement from the credit union boards of directors, supervisory committees and the NCUA over six years by submitting fake letters stating that a person identified in some of the court documents as R.F. performed audits of the credit unions and that their general ledgers were in balance. Prosecutors said R.F. knew Brown but never worked with her, and that R.F. did not have any accounting experience and never conducted audits or signed audit reports. R.F. was never asked by Brown if she could use R.F.’s name on any audit report or verification document for the credit unions. R.F. told prosecutors she would not have allowed that.

“Ms. Brown fully acknowledges responsibility for this ongoing crime and is extremely remorseful,” Meehan wrote in court documents. “She let herself and the company she started down, and she lost many long-term relationships with friends and family because of her deception.”