Former CEO Pleads Guilty for Using False Document to Obtain TARP Funds

Helen Godfrey-Smith, former president/CEO of Shreveport Federal Credit Union, pleaded guilty Wednesday in Louisiana federal court to making and using a false document related to an alleged multimillion-dollar fraud scheme by the CFO, leading to the credit union’s 2017 liquidation.

Godfrey-Smith, 72, of Shreveport, faces a maximum of five years in prison, three years of supervised release and a fine of up to $250,000. Her sentencing hearing has been scheduled for April 2022 in U.S. District Court in Shreveport.

In December 2016, Godfrey-Smith signed an agreement with the U.S. Treasury Department’s Troubled Asset Relief Program and Community Development Capital Initiatives to buy back $2,434,320 in senior subordinated securities. At the time she signed that agreement, however, prosecutors said Godfrey-Smith was aware that there were millions of dollars in false entries on the credit union’s ledger and its books were not balanced. Because she failed to disclose this information, the former CEO signed and submitted a false document to the Treasury Department.

Had Godfrey-Smith disclosed this information, the buyback would have been suspended and SFCU would have kept the $2.3 million on its books. Instead, the credit union paid out the funds and by the spring of 2017, SFCU was liquidated by the NCUA, prosecutors said in court documents.

Prosecutors noted that after Godfrey-Smith signed and submitted the agreement, it did not result in a financial loss for SFCU, the NCUA or the Treasury Department.

Court documents stated that the NCUA was also unaware that SFCU was in a financial crisis in December 2016 when Godfrey-Smith signed the U.S. Treasury agreement, and that the NCUA subsequently found the credit union had amassed a $10 million loss in December 2016.

However, as early as June 2014, the credit union was placed under an NCUA Document of Resolution, which mandated that SFCU hire an external CPA to reconcile every general ledger account and produce a financial statement audit expressing an opinion on its year-end financial statements, according to court documents filed by the NCUA in a civil lawsuit.

Throughout 2014, NCUA examiners issued reports on a variety of serious accounting issues, including that its de-facto CFO Alesia Smith Cummings did not understand Generally Accepted Accounting Principles and the credit union’s accounting staff did not understand how to properly reconcile general ledger accounts. The examiners also identified numerous general ledger accounts that did not have documentation to support the balances listed in the Call Reports, and that management was unable to provide examiners with reconcilements or supporting documents for requested general ledger accounts.

In response to the DOR, SFCU hired a Louisiana CPA firm, HMV, to address these problems. But the NCUA ended up suing HMV in federal court in April for alleged accounting malpractice.

In that civil lawsuit, the NCUA alleged that Cummings was engaged in a “long-term embezzlement scheme from SFCU.”

By late 2016, SFCU’s board of directors again retained HMV for another annual audit, but it was never completed because in the spring of 2017, the NCUA claimed its examiners independently uncovered Cummings’ embezzlement scheme.

The alleged fraud included posting phony deposits to an array of automated clearing house receivable accounts such as undistributed payroll, accrued vacation and 401(k) match accounts. Cummings also allegedly created fake fees that were used to pay bonuses to employees, including large bonuses to Smith. The federal agency also claimed Cummings embezzled funds by making transfers from the ACH clearing accounts to her account, an account she jointly owned with a relative and other accounts owned by Smith, according to the independent federal agency.

“By August 31, 2016, Cummings’ embezzlement and coverup resulted in more than $13.1 million in outstanding ACH deposits listed in SFCU’s ACH clearing account,” according to the NCUA’s court documents. “These fictitious ACH deposits were greater than the $13.014 million balanced listed in SFCU’s corporate account with Louisiana Corporate Credit Union.”

Federal prosecutors, however, alleged that Cummings, who was identified as “Individual 1” in court documents, embezzled approximately $1.5 million from the credit union.

In addition to the $13 million embezzlement that led to the liquidation of SFCU in October 2017, it posted a total loss of $17.6 million at the end of the third quarter of 2017, according to NCUA financial performance reports.

In interviews with CU Times last May, Godfrey-Smith, who served as SFCU’s CEO for 34 years, growing it from $1.9 million in assets to $102 million in assets, said she did not have any knowledge about what she described as a rogue CFO’s “horrible dishonesty.”  When she discovered the embezzlement in February/March 2017, Godfrey-Smith said she immediately fired Cummings.

Cummings died at the age of 51 on April 12, 2017, the day before the NCUA conserved SFCU.

The NCUA did not accuse Godfrey-Smith of any wrongdoing in its findings that were reported in court documents from the civil lawsuit against HMV. Last July, a federal judge remanded the NCUA-HMV civil lawsuit to the Judicial District Court for Caddo Parish.