NEW YORK–The former CEO of the now defunct Melrose Credit Union has lost an appeal of his four-year prison sentence for accepting free housing and hundreds of thousands of dollars in gifts related to an estimated $185 million in “questionable” loans for taxi cab medallions.
As CUToday.info reported, the failure of Melrose CU and other CUs that specialized in taxi medallion loans eventually cost credit unions and the National Credit Union Share Insurance Fund approximately three-quarters of a billion dollars. The medallions plunged in value as ride-sharing services such as Uber and Lyft began to become popular.
The former Melrose CU CEO, Alan Kaufman, had appealed his sentence to the Second Circuit Court, which rejected it.
A Three-Week Trial
In 2021, Kaufman was sentenced to 46 months in prison, following a three-week jury trial, of participating in a scheme in which he accepted from Tony Georgiton free housing and hundreds of thousands of dollars in financing for the purchase of his personal residence, after approving millions of dollars in loans to Georgiton’s companies at favorable terms, according to the United States Attorney for the Southern District of New York.
In addition, Kaufman was also convicted for accepting lavish vacations, including to Paris and Hawaii, from CBS Radio after increasing Melrose CU’s advertising purchases.
The Charges
Among the charges made by prosecutors:
- In 2010, Georgiton purchased a home in Jericho, N.Y., and permitted Kaufman to live in that home rent-free for over two years. While Kaufman was living rent-free at the Jericho Residence, Kaufman personally approved the refinancing of over $100 million worth of loans at Melrose CU held by a company owned by Georgiton with favorable terms. The head of Melrose CU’s loan department did not sign off on the loans made to Georgiton because, among other things, he believed that the terms were too favorable and did not comply with Melrose CU’s loan policy, prosecutors said.
- In 2011, Kaufman sought approval from Melrose CU’s board of directors for Melrose CU to purchase the naming rights to a ballroom under construction in Astoria, Queens. That ballroom was owned by a company that was in turn owned by Georgiton. Kaufman did not disclose to the Melrose Board that he was living rent-free in a house owned by Georgiton at the time he sought Melrose Board approval for the naming rights acquisition. Over the next five years, Melrose CU paid $2 million to Georgiton’s company for the naming rights to the Melrose Ballroom. KAUFMAN also directed that payment for the naming rights be paid a year in advance of the Melrose Ballroom’s actual opening for operations, prosecutors said.
- In 2013, Kaufman purchased the Jericho Residence from Georgiton, with financing that largely came from Georgiton. To purchase the Jericho residence, Kaufman took out a $200,000 loan from Melrose CU, co-signed by Georgiton and secured by Georgiton’s shares in Melrose CU. Georgiton also gave Kaufman a $240,000 unsecured personal “loan.” Georgiton has never made a demand for payment on that purported loan and Kaufman has never made a payment on that purported loan. Rather than repay the loan, the following year, Kaufman purchased a used Maserati sports car valued at over $100,000 for his wife, prosecutors said.
Restitution Ordered
In addition to the prison term, Kaufman was sentenced to two years of supervised release and ordered to forfeit specified property, pay restitution to NCUA in the amount of $2 million, and pay a fine of $30,000.
On Jan. 11, 2021, Georgiton was sentenced to three years’ probation, a fine of $95,000, forfeiture of $286,663.65, and a special condition of nine months’ home confinement, prosecutors said.
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