NEW YORK–Several former members of the board of directors at Municipal Credit Union have filed suit against the state regulator after they were ousted for allegedly failing to properly oversee the CU’s former CEO, who has been arrested and charged with embezzlement.
The suit was filed against Maria Vullo, Superintendent of the state Department of Financial Services, according to the Chief-Leader, which covers labor issues.
According to the Chief-Leader, the Article 78 lawsuit, filed in State Supreme Court, alleges that the state regulator failed to follow its own regulations and made an arbitrary and capricious decision without providing board members a hearing before their dismissal. The Chief-Leader reported it confirmed the existence of the lawsuit with one of the plaintiffs, who requested anonymity because of the decision by State Supreme Court Justice Adam Silvera to seal the filing.
The case is now before Manhattan Supreme Court Justice Melissa Anne Crane, with the next court date scheduled for Oct. 25, the publication said.
The Allegations
As CUToday.info reported here, Municipal Credit Union’s former CEO, Kam Wong, has been charged with embezzling more than $3 million from the credit union by the U.S. Attorney’s Office for the Southern District of New York. According to prosecutors, Wong, 62, allegedly used the money to buy New York State lottery tickets.
The U.S. Attorney has charged Wong with embezzling from the credit union by submitting false invoices for dental work and other expenses. Wong allegedly also "obtained numerous other payments from the credit union under suspicious or questionable circumstances" from at least 2013 through January 2018, according to a released statement from U.S. Attorney Geoffrey Berman.
The Chief-Leader reported court filings indicate the named plaintiff is Tony Abdullah, a former MCU board member and chief officer of the New York City Transit Rail Control Center.
Removal Followed Arrest
The move by the state regulator to remove the supervisory committee and the board followed the May 7 arrest of Wong. Norman Kohn has since been named acting president/CEO.
Prosecutors have agreed to three 30-day extensions, holding off on moving ahead with Wong’s indictment as negotiations continue with the former CEO’s attorneys. The latest extension ends Sept. 8.
According to prosecutors, from July 2013 through January 2018, Wong made 2,592 ATM withdrawals totaling $1.9 million, sometimes involving multiple transactions in a day and using credit union funds, to purchase lottery tickets.
One member of the board told the Chief-Leader, “We relied on several levels of internal controls and audits that are provided by the professional staff, and what we have here is a massive fraud perpetrated on what is a voluntary board.”