Former Melrose CU CEO Alan Kaufman Sentenced to Prison

Federal prosecutors said Alan Kaufman viewed Melrose Credit Union as his personal fiefdom, repeatedly betraying his fiduciary duties to the institution and its members.

“The credit union motto is ‘people helping people.’ Unfortunately, Alan Kaufman ran Melrose Credit Union to help Alan Kaufman - not the hardworking members - mostly small taxi medallion owners, who worked around the clock to make ends meet,” prosecutors wrote in a 38-page sentencing memo to a federal judge. “His crimes were serious and call out for just punishment,”

On Wednesday, the former Melrose President/CEO got his punishment when U.S. District Court Judge Lewis A. Kaplan in New York sentenced Kaufman, 62, to three years and eight months in federal prison. Prosecutors were seeking eight to 10 years, according to court documents.

Judge Kaplan also ordered Kaufman to pay $2 million in restitution to the NCUA and pay a $30,000 fine.

Kaufman’s lawyer, Nelson A. Boxer, did not respond to CU Times‘ request for comment.

After an 11-day trial in March, Kaufman was found guilty on two counts of bribery.

The bribery scheme began in 2010 after Kaufman finalized his divorce and was looking for a new home. Tony Georgiton, a Melrose member who owned a taxi medallion brokerage company and other businesses, offered to buy the former CEO a $630,000 luxury home in a gated community in Jericho, N.Y. Though Kaufman paid expenses such as condominium association fees and taxes, Georgiton allowed Kaufman to live in the Jericho home rent-free for more than two years.

While Kaufman lived in the home, he personally approved for Georgiton’s companies more than $182 million in loans from the credit union with favorable 50-year amortization periods. The loans also provided total cash outs of $9.8 million, according to court documents. The Georgiton loans violated Melrose’s loan policies and were against the advice of the credit union’s chief loan officer and directives from the NCUA.

Prosecutors also noted in their sentencing memo that Kaufman’s longstanding corruption did substantial harm to the credit union.

“The proper harm analysis must consider the opportunity costs associated with the Georgiton loans. Every corrupt out-of-policy loan made to Georgiton prevented Melrose from extending an in-policy loan to a different member of the credit union,” prosecutors wrote. “It cannot be disputed that in-policy loans (with higher interest rates and shorter amortization periods) would have yielded greater returns for Melrose Credit Union. Yet, rather than provide loans at market rates for needy taxi-cab drivers, the defendant provided out-of-policy loans to Georgiton.”

What’s more, Kaufman used the credit union’s funds to pay $2 million for the naming rights of a local ballroom that was owned by one of Georgiton’s companies.

Former Melrose Marketing Director Robert Nemeroff told Kaufman the ballroom naming rights were worth only $50,000 and were of minimal marketing value to the credit union, prosecutors said. In response, Kaufman wrote in an email to Nemeroff, “I didn’t ask for your opinion. Not that it isn’t valued.” Despite the marketing director’s objections, Kaufman went ahead with the deal.

Nemeroff was later fired by Kaufman, and it turned out to be Nemeroff who filed a November 2015 whistleblower complaint with the NCUA’s Inspector General. His complaint, which led to Kaufman’s bribery indictment in 2019, accused the former CEO of nepotism, improper uses of Melrose funds, improper favors to friends and family, improper benefits from vendors and members, mistreatment of Melrose employees, and engaging in questionable and risky business practices.

Nemeroff also testified against Kaufman during his trial.

In 2013, Kaufman agreed to buy the home from Georgiton for $630,000.

The former CEO obtained the money to buy the home with a $200,000 loan from Melrose, which was co-signed by Georgiton and secured by his credit union shares, and a $240,000 unsecured personal loan extended by Georgiton to Kaufman for which no promissory note was executed, and which was never repaid. Rather than repay the loan, the following year Kaufman bought a used Maserati sports car for his wife, valued at more than $100,000.

Georgiton, who pleaded guilty to one felony count of conspiracy to commit bank bribery, was sentenced in January to three years of probation, which included nine months of home confinement, for his role in a multi-million-dollar bribery scheme.

During his trial, prosecutors also showed that Kaufman, from 2010 to 2015, directed about $850,000 in credit union funds annually to media vendor CBS Radio for advertising. In exchange, he received luxury trips to Paris and Hawaii for him and his wife. The former CEO did not disclose to Melrose’s board of directors that he accepted, and in one case, demanded first-class vacations from CBS Radio.

The $1.1 billion Melrose, founded by Kaufman’s family, was liquidated in September 2018 after posting more than $745 million in taxi medallion loan losses. Many drivers who took out Melrose loans could not repay them as the value of their taxi medallions plunged because of competition from ride-sharing companies.

The $8.7 billion Teachers Federal Credit Union in Hauppauge, N.Y., acquired Melrose’s estimated $412 million consumer, residential and commercial loan portfolio. The portfolio purchase did not include Melrose’s troubled taxi medallion loans.