Chip Filson Raises More Questions About Creighton FCU's Massive Losses
Veteran credit union observer finds new anomalies in tiny Nebraska credit union’s reports leading to $13.5 million loss.
Creighton Federal Credit Union of Omaha, Neb. ($66.9 million in assets, 9,829 members on June 30) had the largest loss among all credit unions for the three months ending June 30: $13.5 million, following a loss of $102,614 in the first quarter and no annual losses in at least the past five years.
Creighton’s plight has been followed closely by Chip Filson, a longtime credit union observer and former director of the NCUA’s Office of Programs from 1981 to 1984.
In his “Just a Member” blog Wednesday, he wrote that the $13.5 million loss was accompanied by a $12.8 million increase in shares from March 31 to June 30 — up 21% in three months.
Filson wrote that the under-reporting of share balances is “a pattern often used to cover irregular transfers of funds.”
“Because the amount is so large such that a large diversion of $500,000 or $1.0 million would cause attention or a cash flow problem, this diversion has probably occurred for many years. For example at $1.0 million per year would be only $250,000 per quarter,” he wrote.
“To accomplish this outflow by reducing reported member share balances, there would have to be two sets of books—the incorrect numbers for the auditors and examiners, and then the actual records so members would not see shortfalls in their accounts,” he wrote. “The fact that the under reported balances were totaled so quickly, suggests this second set was readily available.”
Going back 10 years, Filson said quarterly net income was not reflected in net worth, a pattern he said “should have raised questions.”
Filson’s previous blog Aug. 14 said a $12.5 million “miscellaneous non-interest expense” charge in the second quarter “suggests a newly discovered financial hole due to misappropriation or other sudden loss event.”
CU Times reported Aug. 29 that NCUA said Creighton’s acquisition by Cobalt through a merger “involved no funding from the Share Insurance Fund.”
Filson’s latest blog continued his criticism of NCUA oversight. “Outside audits, supervisory committee verifications and NCUA exams are all intended to keep honest people honest,” he wrote. “How could these required processes have failed so hugely and over such an extended time period?”