Prison Sentence Given to Former Credit Union CEO for Embezzlement

A federal judge sentenced Kelly Givens to 10 months in prison on Tuesday for embezzling $10,000 from the $23.7 million FedStar Federal Credit Union in Salem, Va., while she was its president/CEO.

U.S. District Court Judge Elizabeth K. Dillon in Roanoke also ordered Givens to pay $10,000 in restitution and a $100 special assessment fine. The former credit union executive also must complete two years of supervised release following her prison term.

The prison sentence, however, was less than what prosecutors had asked Judge Dillon to impose on Givens, which was 18 months.

“In the course of four years, while serving as CEO, Kelly Givens ran FedStar Federal Credit Union into the ground. She admits to — and has now been convicted of — embezzling $10,000 in credit union funds,” federal prosecutors wrote in their sentencing memo to Judge Dillon. “Worse, her embezzlement scheme continued even after she had first been caught.”

After it came to light in August 2019 that Givens had linked her PayPal account to the company credit card and charged thousands of dollars in personal expenses, including boudoir photos, Uber rides and concert tickets, to FedStar, Givens continued to embezzle credit union funds via the Amazon business account.

“At this point, Givens was plainly on notice, having also used the FedStar credit card to make personal purchases while working under the prior CEO. She simply did not care,” prosecutors said. “Givens continued to fund her lifestyle from FedStar accounts, racking up an additional $10,000 in personal expenses on Amazon. These additional personal expenses were uncovered during an NCUA examination, with which Givens was uncooperative.”

But prosecutors noted her conduct extended well beyond making thousands of dollars in personal purchases using FedStar monies.

Prosecutors argued Givens engaged in a sophisticated scheme to defraud FedStar and its members by artificially inflating its net worth to make it appear that it nearly doubled in size in five years, according to court documents. Consequently, no one looked too closely to determine that its actual financial status was grim — ultimately leading to the failure and forced merger of FedStar in June 2021.

Givens underfunded and/or misstated the Allowance for Loan and Lease Losses (ALLL) account; failed to charge off delinquent loans; reported negative liabilities; issued unsecured loans over policy limits; employed weak internal controls; and miscategorized non-member deposits, according to prosecutors.

At times and using her own initials, she made adjusting entries on the general ledger noting “to correct G/L,” and provided financial records to the board of directors that differed from the records provided to the NCUA’s Call Reports. Prosecutors also asserted that Givens stacked the board of directors with family and friends, though there was no evidence that the board members recruited by Givens took any action or failed to take action because of any relationship.

In her plea deal, prosecutors agreed to recommend a prison sentence of four months to 24 months. However, a presentence investigation report recommended an advisory sentencing guideline of 46 to 57 months because Givens, in part, used a sophisticated scheme that jeopardized the safety and soundness of the financial institution and abused her CEO position of trust.

In January, a court hearing was held to hear evidence from both sides regarding the issues of the presentence investigation report.

According to court documents, Givens admitted she was woefully unprepared for the CEO’s job and acted with the knowledge of and upon the advice of others, including the NCUA regulatory personnel. Her lawyer argued for a prison sentence of four to 10 months.

But prosecutors contended that Givens’ sophisticated scheme obscured the financial health of FedStar, which gave the board of directors and regulators the impression the credit union was thriving. This skewed picture caused them to think Givens was doing a good job and prevented them from looking too closely as she embezzled about $10,000 and led the board to increase her salary and give her bonuses.

What’s more, NCUA Director of Special Actions Gary Luvera testified that Givens’ manipulation of FedStar’s books was indicative of someone who knew what she was doing, according to court documents. He also testified that FedStar’s failure was the $1.2 million of general ledger entry adjustments that were made by and initialed by Givens.

“Givens made countless, indiscriminate ‘to correct G/L’ entries in the general ledger to obscure the full picture and ensure no one could go back and piece together why the entries were made,” prosecutors said. “As it turns out, she was successful.”

However, after the January hearing, Judge Dillion ruled earlier this month that Givens did not use a sophisticated scheme that jeopardized the safety and soundness of the credit union that led to its forced merger because her $10,000 embezzlement did not contribute to FedStar’s demise.

Instead, Judge Dillon ruled that she would use the sentencing advisory guideline range of four to 10 months in prison for Givens.

Givens’ defense attorney said that her client’s guilty plea recognized that her own decisions/actions/failures have created the situation she now faces and that she will live with that shame and regret for the rest of her life.

“Given the character Ms. Givens has shown in having overcome a challenging and traumatic childhood, given her previous pattern of law-abiding behavior, her strong employment history, and commitment to her family, this court has every reason to believe that a sentence of between 4-10 months, to be served on home confinement, will be more than sufficient to accomplish the objectives outlined in (federal law),” Givens defense attorney said. “Such a sentence will surely be sufficient to discourage Ms. Givens from future criminal activity and act as a protectant to the public from future crimes.”

According to NCUA financial performance reports, the 3,500-member FedStar posted a loss of $2,203,602 at the end of 2020 and recorded an additional loss of $16,482 at the end of the first quarter of 2021 when it consolidated with the $215 million InFirst Federal Credit Union in Alexandria.