Friday, March 28, 2014

Loss from Taupa Lithuanian Credit Union Failure Is $33.5 Million

The Material Loss Review (MLR) of Taupa Lithuanian Credit Union (Cleveland, Ohio) by the National Credit Union Administration's Office of the Inspector General (IG) found that fraud caused the failure of credit union.

According to the MLR, the Ohio Department of Financial Institutions liquidated Taupa Lithuanian on July 15, 2013 and the loss to the National Credit Union Share Insurance Fund from Taupa Lithuanian's failure is estimated at $33.5 million.

The IG report states that Taupa Lithuanian failed primarily due to management fraudulently overstating assets and understating shares. Specifically, examiners discovered assets overstated by approximately $15.5 million, which Taupa management fraudulently reported as cash on deposit at Corporate One Federal Credit Union, and noted an $18 million share understatement, altered documents, inaccurate Call Reports, and other suspicious transactions.

The report also notes that examiners missed numerous red flags, such as excessive amounts of cash on deposit, the discovery of an unaccounted for bag of coins under the sink, an overdrawn employee account for an extended period, an overdrawn line of credit at the corporate credit union, and an evasive CEO. The report said that these red flags should have warranted expanded examination procedures.

In NCUA's November 2011 review of the state examination working papers from 2010, NCUA's examiner-in-charge noted that what was happening at Taupa Lithuanian was eerily similar with what transpired at failed St. Paul Croatian FCU. Specifically, the examiner-in-charge commented:

[M]BLs, policy updates, investment & record keeping errors, NO delinquency & NO charge offs in over 10 years, this CU looks, sounds & acts like St. Paul's Croation [sic] waiting to happen all over again.

Read the MLR.

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