NEW YORK–The former president of a now defunct credit union that specialized in taxi medallion loans who was found guilty of committing one of the largest and long-lasting frauds in credit union history, with allegations including the personal approval of more than $185 million in questionable loans, has been sentenced to 46 months in prison.
The United States Attorney for the Southern District of New York said Alan Kaufman, CEO of the former Melrose Credit Union, was sentenced 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.
As CUToday.info reported here, Kaufman was also convicted for accepting lavish vacations, including to Paris and Hawaii, from CBS Radio after increasing Melrose CU’s advertising purchases at CBS Radio.
Kaufman’s sentence was imposed by United States District Judge Lewis A. Kaplan.
Melrose Credit Union was one of a half-dozen CUs that specialized in taxi medallion loans that eventually lost most of their value and which led to the shuttering of the credit unions at a cost to the NCUSIF of nearly three-quarters of a billion dollars.
‘You Don’t Get It’
According to reporting by Crain’s New York, at the sentencing Judge Kaplan was “unimpressed. He said Kaufman showed no remorse nor any understanding that he’d broken the law and done wrong by Melrose’s 20,000 members who drove taxis at all hours to pay down their loans.”
“You don’t get it,” Crain’s quoted the judge as saying as Kaufman shook his head vigorously.
The judge noted Melrose Credit Union had been founded by Kaufman’s grandfather, and his father had succeeded him as manager before Kaufman took over as president/CEO.
“This was a family-run business,” Kaplan said of the credit union led previously by Kaufman’s father and grandfather. “If you ran a delicatessen you could do what you want. But this was a federally insured credit union and you were oblivious to that fact.”
‘Shirked His Duty’
“Alan Kaufman accepted lavish gifts from Tony Georgiton as a reward for favorable loan rates for Georgiton’s companies,” said U.S. Attorney Audrey Strauss in a statement. “In addition, Kaufman accepted luxury travel and hotel accommodations in return for approval of advertising spending by Melrose Credit Union at CBS Radio and elsewhere. Kaufman shirked his duty to act in the best interests of the credit union and its account holders, exploiting his position for personal gain. Now, thanks to the work of the FBI, Kaufman will spend time in federal prison for his crimes.”
The Allegations
According to the Indictment, documents previously filed in the case, and evidence presented at trial, the U.S. Attorney said:
- In 2010, Georgiton purchased a home in Jericho, New York (the “Jericho Residence”), 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.
- 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 (the “Melrose Ballroom”). 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, the U.S. attorney 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,” the U.S. Attorney said.
- In addition, from in or about 2010 through in or about 2015, Kaufman solicited and accepted lavish vacations and other gifts worth tens of thousands of dollars from CBS Radio and other media vendors, after Kaufman approved advertising spending by Melrose CU. “For example, in 2010, CBS Radio paid for Kaufman and his wife, who also worked at Melrose CU, to fly to Paris, France, and stay at the Four Seasons George V Paris. In 2012, CBS Radio paid for KAUFMAN and his wife to fly to Maui, Hawaii, and stay at the Four Seasons in Wailea. In 2013, CBS Radio paid for Kaufman and his wife to attend the Super Bowl in New Orleans.”
- Kaufman did not seek approval for these vendor-paid trips from the Melrose Board, nor did he disclose these vendor-paid trips to the Melrose Board, in violation of Melrose CU’s anti-bribery policy.
Additional Punishment
In addition to the prison term, the U.S Attorney said Kaufman, 62, of Jericho, N.Y., 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.
The U.S. Attorney noted that 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.
Trump’s Former Attorney Involved In CU
As CUToday.info reported, the Melrose case at one point also involved President Trump’s former attorney, Michael Cohen. Federal prosecutors had zeroed in on $20 million in loans obtained by Cohen from financial institutions that include a Melrose.
Additional reporting can also be found here.