May 3, 2019
By Dominic J Bartolone
Contributing Editor, Fraud Friday
Fraud Friday – Ex Credit Union CEO Pleads Guilty to Fraud
The former CEO of a Minnesota credit union who was accused of stealing more than $10 million, pleaded guilty to stealing at least $2.5 million after a five-year investigation by the FBI.
Margurite Mary Cofell, the former president/manager/CEO of the St. Francis Campus Credit Union in Little Falls, appeared in U.S. District Court in St. Paul on April 3 to plead guilty to a single criminal charge of felony credit union fraud.
On February 14, 2014, the Minnesota Department of Commerce closed the $51 million St. Francis Campus Credit Union an appointed the National Credit Union Administration (NCUA) as the receiver and liquidating agent. About three weeks earlier, the FBI launched its investigation into what caused the financial collapse of the institution.
Even as the FBI started its investigation, the fraud wasn’t publicly exposed until January 2016, after the NCUA sued the insurance company, CUMIS, over its decision not to pay the federal agency’s fidelity bond claim. The NCUA filed proof of loss with CUMIS for $3,086,755. CUMIS rescinded the fidelity bond agreement, saying that in April 2013, Cofell lied on the credit union’s application to extend the employee dishonesty coverage from $2.25 million to $2.75 million.
A forensic auditor hired by the NCUA alleged Cofell’s embezzlement scheme resulted in a loss of more than $10 million, directly leading to its failure.
After NCUA examiners confronted her, Cofell admitted in a written statement that she began embezzling in the 1990s. However, the forensic auditor was only able to obtain complete transaction documentation from 2011 to 2014 because Cofell allegedly destroyed the data processing system’s backup information prior to 2011.
Based on the available documentation from 2011 to 2014, the forensic auditor concluded that Cofell embezzled approximately $3 million.
In 2017, the NCUA filed a $2.8 million civil suit against Cofell, who denied the charges of civil theft, fraud and misrepresentation, unjust enrichment, conversion and failing to perform her fiduciary duty.
Federal court documents state that Cofell knowingly and fraudulently diverted credit union funds into her accounts and the accounts of family members and friends by creating fictitious electronic deposits. The phony deposits inflated available balances on member accounts, allowing Cofell to make withdrawals of actual member funds and deposit them into her accounts.
Court documents also show that Cofell created fake supporting documents for legitimate and fraudulently-issued loans that purportedly used names, account numbers, and funds of various members to pledge as collateral against the loans.
The single felony count carries a maximum sentence of 30 years in prison, followed by five years of supervised release. Cofell also faces up to $1 million fine or twice the gross gain or loss generated by the offense, whichever is greater.