Appeals Court Upholds Bribery Conviction of Former Credit Union CEO

The U.S. Court of Appeals for the Second Circuit in New York affirmed the conviction, sentence and restitution order of disgraced Melrose Credit Union President/CEO Alan Kaufman.

U.S. Court Judge for the Southern District of New York Lewis A. Kaplan sentenced Kaufman to three years and eight months in prison on Sept. 29, 2021 after a jury found him guilty on two counts of bribery. Kaufman also was ordered to pay $2 million in restitution to the NCUA and a $30,200 fine. Another court order required the former credit union CEO to forfeit to the government his 2,162-square-foot home in Jericho, N.Y.

Although he was ordered to report to prison on Nov. 30, 2021, Kaufman filed an appeal. Judge Kaplan agreed to allow the former CEO to remain free on bond until the appeals court rendered a decision.

In a 20-page ruling released on Friday, a three-judge panel of the appeals court rejected Kaufman’s contention that the district court’s sentence was substantively unreasonable.

“We only find sentences substantively unreasonable if they are so shockingly high, shockingly low, or otherwise unsupportable as a matter of law that allowing them to stand would damage the administration of justice,” the appeals court wrote. “In light of the significant value of the gratuities received by Kaufman, we cannot say the Kaufman’s forty-six-month sentence is unreasonable.”

Kaufman’s attorney, Nelson Boxer in New York, said, “We’re reviewing the decision and considering Mr. Kaufman’s options.” Boxer did not clarify what those options are. In general, a court of appeals decision usually will be the final word of a case, which would require Kaufman to report to a federal prison. In his November 2021 sentencing order, Judge Kaplan recommended that Kaufman be assigned to a low security facility near the New York metropolitan area. As of Monday afternoon, no new court orders have been filed for Kaufman to begin his prison sentence.

Kaufman accepted bribes from Tony Georgiton, owner of a taxi medallion brokerage company, and other businesses.

After Georgiton bought a $630,000 home in Jericho, N.Y., where Kaufman lived rent free for more than two years, the former credit union CEO repeatedly approved tens of millions of dollars in Melrose loans with favorable interest rates for Georgiton’s companies. What’s more, while he was living rent free at the home, Kaufman used $2 million in the credit union’s funds to pay for the naming rights of a local ballroom that was owned by one of Georgiton’s businesses.

Kaufman later purchased the home with an unsecured loan from Georgiton and a $200,000 loan from Melrose co-signed by Georgiton.

The appeals courts determined that it saw no error in Judge Kaplan’s sentencing order for Kaufman to pay $2 million in restitution and to forfeit his home.

During his trial, prosecutors 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, Kaufman received luxury trips to Paris and Hawaii and other excursions worth thousands of dollars 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. In a previous court ruling, Judge Kaplan found that Kaufman’s vacations at CBS Radio’s expense were outside the scope of the safe harbor provision and that Melrose’s policy prohibited its employees from accepting anything worth more than $100 from Melrose’s vendors.

The appeals court agreed with Judge Kaplan’s ruling, concluding that “a juror could reasonably infer that the vacations did not constitute bona fide … expenses paid or reimbursed in the usual course of business.”

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 the estimated $412 million consumer, residential and commercial loan portfolio of Melrose. The portfolio purchase did not include Melrose’s troubled tax medallion loans.

In 2019, Kaufman was indicted on bribery charges, which were based in part on a November 2015 whistleblower complaint filed with the NCUA’s Inspector General by former Melrose Marketing Director Robert Nemeroff. He was fired by Kaufman.

He accused Kaufman 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 testified against Kaufman during his two-week trial in March.

Read More: Court of Appeals ruling.