STUDIO CITY, Calif.–More specific details around the steps a credit union CEO took to allegedly embezzle more than $40 million are included in documents filed in the U.S. District Court for the Central District of California.
During an interview with investigators from NCUA, the FBI and the Los Angeles Police Department, Edward Rostohar, the former CEO of C B S Employees FCU, allegedly provided an explanation of how the scheme worked.
“According to preliminary findings by NCUA of how the scheme worked as outlined in the court documents, Rostohar’s process was to pretend to ‘withdraw’ funds from member accounts by using the credit union's data processing system to issue a check with a blank payee,” the court documents state. “He then manually typed the name and address of a member on the credit union receipt to ensure the credit union's physical records would show a member's name and address as the payee information; the check was shown with a blank payee on the data processing system.”
Manual Process
According to the complaint, funds to issue the check were withdrawn from share account, number 9999999-S1, which belongs to the credit union and is used as a clearing account.
“Once the credit union check was issued on the data processing system, he would manually type a payee of his choosing, most often reflecting his name or an associated party name,” the documents continue. “Then, he would deposit the altered check in an account that he controlled.
“Account 9999999-S1 was funded as follows. Rostohar identified and exploited a weakness in the ShareOne data processing system,” according to NCUA’s analysis, as cited in the court filing. “He posted entries to general ledger account #901000, Regular Shares. This account is intended to reflect the aggregate of all deposits held in the individual member share accounts listed on the member share and loan trial balance. By making a general ledger entry moving a ‘deposit’ from Regular Shares (account #901000) to the credit union's share account (9999999-S1), he would then be able to withdraw money out of the credit union's share account by issuing a credit union check through Catalyst Corporate Credit Union.”
Some Members Complained
Court documents indicated there had been member complaints about unauthorized withdrawals from their account.
As CUToday.info reported separately, other sources have indicated Rostohar also kept to sets of books, one of which did not show certain member certificates of deposit.