It all started with a CEO that embezzled $6M for lottery tickets.
$4.1 billion Municipal Credit Union and the NCUA have reached a settlement in a lawsuit against CUMIS Insurance Society after its refusal to pay a $9.8 million insurance claim to cover the losses tied to fraud and corruption charges brought against convicted CEO Kam Wong and others that led to MCU’s conservatorship. Kam allegedly spent more than $6 million on lottery tickets.
Last week, Southern District of New York Manhattan Federal Judge Valerie E. Caproni dismissed the case after attorneys for MCU, the NCUA and CUMIS advised that they had reached an “agreement in principle resolving all issues.”
Settlement details have yet to be disclosed.
The lawsuit filed in May of 2020, disclosed allegations of flagrant fraud and corruption at New York City’s oldest credit union. These widespread allegations involved its convicted CEO and at least five executives, two supervisory committee members and 13 former board members. The damage of their actions led to an alleged more than $18 million in.
The conserved Municipal Credit Union and the NCUA sued the Madison, Wisconsin based CUMIS, the credit union bond insurer, as the result of their refusal to pay a $9.8 million insurance claim on the losses incurred by former President and CEO Kam Wong. Wong was sentenced to five and a half years in prison back in 2019.
While CUMIS acknowledged the losses, it denied owing the NCUA requested $9.8M due to Wong’s embezzlement.
The lawsuit also alleged embezzlement losses totaling more than $4.3 million from the actions of former board members; the chief human resources and labor relations officer, an executive office operations manager, and retired New York City police officer and certified fraud examiner serving as the Supervisory Committee Chair and head of MCU’s Fraud and Security Department, Joseph Guagliardo.
In July of 2020, Guagliardo was sentenced to 27 months in federal prison after pleading guilty to his part in the embezzlement of more than $400,000.
MCU’s internal investigation also discovered that former supervisory committee members had engaged in other acts of dishonesty including self-dealing, improper charitable contributions, entering into unauthorized contracts for the use of a minor league baseball stadium (MCU Park). The expanse of these losses were an estimated $800,000.
But there’s more! Thirteen of MCU’s former board members were accused of dishonest acts, which included improper charitable contributions, purported expense reimbursements in violation of MCU policy, and MORE inappropriate use of the minor league MCU Park. According to court documents, the losses amounted to another $925,000.
Worse yet, a judge in Kings County Supreme Court, in Brooklyn and a former chair of the MCU board, Sylvia Ash, has been charged with criminal conspiracy to obstruct justice, obstruction of justice and other criminal charges. These charges stem from her attempts to influence and impede a federal investigation into fraud and corruption at MCU. She has pleaded not guilty to the charges. Her trial is scheduled to begin in October.
Also eye opening, were the salaries of MCU’s executive staff.
According to the latest 990 IRS tax forms available dating from 2016, Mr. Kohn, MCU’s Chief Credit Officer, was making $655,000 in salary and bonus and more than $40,000 in additional compensation.
Kim Thompson, MCU executive vice president for human resources and labor relations, made $622,000 plus $70,000 in other benefits.
Thomas Siciliano, the credit union’s general counsel, received more than $611,000 in salary and $40,000 in additional compensation.
By comparison, the CEO for the Navy/Army Community Credit Union was paid $420,000 and the Chief Financial Officer got $176,000 in total compensation. Compensation for vice presidents at the State Employees Credit Union of Maryland averaged $300,000.
Monique Smith, the MCU executive office manager, was paid $255,000 in salary and garnered $62,000 in additional compensation.
Fraud and Corruption Claim Lawsuit Settled Between NCUA, Municipal CU and CUMIS
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