BRIARWOOD, N.Y.–NCUA has turned to an infrequently filed authority to file administrative charges against Alan S. Kaufman, former CEO, treasurer, and board member of Melrose Credit Union.
NCUA said it is seeking a prohibition order against Kaufman and requesting he be ordered to pay restitution of at least $3.5 million. In addition, the NCUA Board assessed Kaufman with a civil money penalty of $1 million.
In February of 2017, NCUA placed Melrose into conservatorship due to losses on the credit union’s loan portfolio, which is made up primarily of taxi medallion loans that have declined sharply in value as services such as Uber and Lyft grabbed marketshare. Melrose CU’s most recent call report shows net worth approaching negative 25%.
The seven-count notice of charges was filed with the Office of Financial Institution Adjudication.
In its filing, NCUA has alleged Kaufman breached his fiduciary duties to Melrose by placing his own interests above those of the credit union, that he engaged in unsafe or unsound practices, and that he violated applicable laws and regulations. The notice further alleges that Kaufman benefitted from his actions and that he caused “severe financial loss” to Melrose.
“These practices and breaches involved personal dishonesty by Kaufman and demonstrated Kaufman’s unfitness to serve as a director, officer, and to otherwise participate in the conduct of the affairs of an insured credit union,” the charges state.
Kaufman joined Melrose in 1984 and, in 1998, became CEO, treasurer, and a member of the board. On July 5, 2016, the Melrose Board removed Kaufman from his position as CEO of Melrose and later that year, Kaufman was removed as a board member and secretary for Melrose.
As CUToday.info reported here, in August of 2016 a consent order was issued to the then $1.9-billion Melrose Credit Union by the New York State Department of Financial Services following a joint safety and soundness exam conducted by the Department and NCUA.
As of March 31, 2018, the credit union’s call report indicates assets had shrunk to $1.2-billion and it posted a $111.1-million loss for the quarter, with $450-million in reportable delinquent loans. It posted a net worth ratio of -24.75%.