NCUA Bans Three Former Employees, Including Two CEOs

Three former credit union employees, including two CEOs, were permanently banned from participating in the affairs of any federally insured depository institution, the NCUA announced Friday.

While she was president/CEO of the $38.1 million Southern Pine Credit Union in Valdosta, Ga., Leah Lehman allegedly defrauded the financial cooperative of $4.5 million by issuing loans in the names of her husband and son and then converting the proceeds of those loans for her own personal purposes. Neither her husband nor son would have qualified for those loans, according to the NCUA.

The alleged fraud became public after the credit union filed a federal lawsuit against its insurer last June. Southern Pine alleged the embezzlement began in June 2003 when Lehman created a loan account in her husband’s name, took an advance of $7,850 and transferred the proceeds into the joint share draft account she shared with her husband. According to the credit union’s lawsuit, over the next 17 years, Lehman continued to use her own joint accounts, her husband’s account and accounts belonging to other family members to take out fraudulent loans.

In addition, former Southern Pine Controller Teresa Paulo allegedly began transferring funds from relatives’ accounts “for temporary cash flow needs” in 2006. A year later, she created a loan account that was purportedly secured and took advances to pay credit card bills and for other spending, according to court documents. Paulo allegedly stole more than $1.2 million. According to the lawsuit, the FBI has launched an investigation.

The alleged multi-million dollar fraud placed Southern Pine into conservatorship on June 11, 2020; it was released from it on March 17, 2022.

The NCUA has not issued a prohibition notice against Paulo.

While Nellie Gray was the president/CEO of the $2.3 million Mississippi Central Federal Credit Union in Morton, Miss., she allegedly caused the financial cooperative to issue her additional payroll checks on top of her regular pay. She also allegedly paid herself advances on an anticipated annual bonus where those advances exceeded the bonus that was subsequently authorized, the NCUA said in its prohibition notice.

The federal agency, however, did not report how much money Gray allegedly paid herself, for how long her scheme lasted, or whether the former CEO has made or has agreed to make restitution. The prohibition notice did not indicate that law enforcement authorities were involved.

Gray had been CEO since at least 2012, according to the Mississippi Central’s profile reports filed with the NCUA.

Jennifer Baker, a former employee of the $4.5 million United Neighbors Federal Credit Union in Watertown, N.Y., allegedly disregarded the credit union’s loan and check hold policies that enabled one member to accrue a significant negative balance resulting in losses of $13,153, the NCUA said.

What’s more, Baker allegedly used the credit union’s funds, without authorization, to make a $1,246 payment on her personal loan.

The federal agency did not report when this alleged scheme occurred or whether Baker has made or agreed to make restitution. The prohibition notice did not indicate that law enforcement authorities were involved.

Baker, Gray and Lehman did not admit or deny the allegations made against them in the NCUA’s administrative prohibition notices.