April 5, 2019
By Dominic J Bartolone
Contributing Editor, Fraud Friday
Fraud Friday — CBS Credit Union Manager Indicted for Embezzlement
After looting more than $40 million over 20 years, the former manager of the CBS Employees Federal Credit Union has been arrested and charged with embezzlement. Edward Rostohar faces felony counts of bank fraud and aggravated identity theft for his part in a scheme to steal money by issuing fraudulent checks to himself.
After Rostohar’s arrest two weeks ago, the National Credit Union Administration, which regulates federal credit unions, announced that it had liquidated the credit union and shut down operations. It also said that the University Credit Union would immediately assume CBS Employees FCU assets.
According to court documents, the scheme was uncovered on March 6, when a credit union employee discovered a $35,000 check made out to Rostohar and which was signed with a forged signature of another credit union employee. The other employee was not aware that his signature was being used to sign checks and was not involved in the scheme.
On March 12, the credit union suspended Rostohar from his job after an internal investigation uncovered “irregularities in the performance of your job duties.” Later that same day, Rostohar’s wife called 911 and told authorities that she believed her husband stole money from the credit union and was planning on fleeing the country.
Rostohar was arrested and allegedly told police that he had been stealing money from the credit union for the past 20 years. He claimed he began the theft by paying the monthly balances on his personal credit cards with funds from credit union’s online account with forged checks. Later, he began forging his coworker’s signature on checks and depositing them into his personal bank accounts.
An NCUA examination of the bank’s records up until February 28 found a potential loss to the credit union of $40,541,130 during the time Rostohar was employed. It was later determined that this loss caused the credit union to become insolvent with no prospect of restoring viable operations, prompting the NCUA to liquidate the entity and nominate University Credit Union of Westwood to purchase and assume all assets, loans and member shares effective March 29.
Federal prosecutors say that Rostohar spent the embezzled funds on gambling, luxury cars, watches, and travel by private jet. Court papers also show that Rostohar used the stolen monies to open a business in Reno, Nevada, pay his wife a weekly allowance of $5,000, and pay the $5,000 mortgage on a house he bought in Reno.
The internal audit found that since January 2018, Rostohar had forged and cashed checks totaling $3,775,000.
Rostohar, of Studio City, remains in custody as the judge ruled he is a flight risk and considered an “economic threat” to the community. He faces a maximum sentence of 30 years in federal prison and up to a $1 million fine.