Regulators Release Municipal Credit Union From Conservatorship

Federal and state regulators said Wednesday the $4.1 billion Municipal Credit Union has been released from conservatorship following its widespread fraud and corruption scandal that led to millions in losses and criminal convictions.

The New York State Department of Financial Services took possession of MCU in May 2019 and appointed the NCUA as conservator.

“Municipal’s leadership and staff diligently worked to fix identified problems, guide Municipal through this conservatorship, and restore the credit union’s health, so that we can now return governance of the credit union to its members,” NCUA Chair Todd Harper said in a prepared statement. “Their efforts, along with the hard work of NCUA employees and the New York State DFS, have led to a credit union that is now on a sound footing and ready to provide essential financial services to its members.”

Criminal and civil court actions that followed the conservatorship of MCU revealed details and allegations of MCU’s rampant fraud and corruption that led to more than $18 million in financial losses and $109 million in write-down losses.

Former MCU CEO Kam Wong, who embezzled nearly $10 million, was sentenced in June 2019 to five and a half years in prison. The 66-year-old Wong is scheduled to be released from federal prison in Fox Dix, N.J., on April 30, 2024, according to the Federal Bureau of Prisons. Court documents showed federal authorities received more than $1.5 million for Wong’s assets (bank accounts, cars, real estate) that were seized following his sentencing hearing.

Joseph Guagliardo, 64, a former MCU supervisory committee member who embezzled more than $468,000, was sentenced in July 2020 to 27 months in prison. However, after the retired New York City police officer and certified fraud investigator began his federal prison sentence in September 2020, he was released on Jan. 13, according to the Federal Bureau of Prisons. He served only 16 months of his 27-month prison sentence. Court documents did not explain why Guagliardo was released.

In addition, former MCU Board Chair Sylvia Ash was found guilty of obstructing justice and other crimes by a New York jury in December 2021. Prosecutors said the case was about a cover-up because Ash deleted and hid evidence from a federal grand jury that was investigating the MCU case. On Wednesday, a New York judge denied Ash’s motion for a new trial. She is scheduled to be sentenced in April.

What’s more, civil court filings revealed that five other former top executives at MCU, another supervisory committee member and a dozen former board members were allegedly involved in numerous “dishonest acts” that led to losses of more than $4 million.

At the end of 2019, the credit union posted a net loss of $82,731,445, according to NCUA financial performance reports. Despite its reputation being damaged, MCU’s membership fell by only 1.52% in 2019 and increased by 3.23% in 2020, NCUA financial performance reports showed.

Though MCU’s loans declined by 1.23% in 2019 and 5.70% in 2020, its loans grew by 5.25% in 2021. The credit union ended that year with a net gain of $111 million, up from a net gain of nearly $46 million in 2020.

At the end of 2021, the credit union’s net worth was 7.21%, according to NCUA financial performance reports.

“Municipal Credit Union’s emergence from conservatorship is a significant victory for the hundreds of thousands of New Yorkers who rely on the institution for their financial needs,” New York’s DFS Superintendent Adrienne Harris said in a prepared statement. “This successful collaboration of state and federal regulators puts the credit union back under New York State supervision, and we look forward to its continued operation in a safe and sound manner.”

MCU’s 507 employees operate a corporate office and 14 listed branches, which serve 586,597 members throughout New York City.