WICHITA, Kan. (AP) - A fired Parsons-Pittsburg Credit Union employee is believed to have embezzled $10 million in missing deposits from the now defunct operation and gambled away much of the money, recently released court documents show.
The filings last week in U.S. District Court in Kansas reveal for the first time the magnitude of losses that led the Kansas Department of Credit Unions in January to place the state-chartered credit union into conservatorship. It ultimately found it insolvent and liquidated it in March, with another credit union assuming operations.
It remains unclear how so much money could have disappeared without authorities noticing sooner. Department administrator John Smith said Monday that the credit union submitted incorrect data about accounts that regulators didn’t know existed. He said a forensic audit is underway to determine how it was done.
“A loss of this size is painful to us,” Smith said. “It looks like we are not doing our job. That is not the case.”
Authorities are scrambling to seize whatever assets they can find. An April raid at the suspect’s home netted two cashier’s checks totaling $130,000, gold coins, silver coins, a Prada handbag, a vehicle, documents showing the purchase of U.S. savings bonds, and other paperwork.
The Associated Press is not naming the ex-worker because no criminal charges have been filed. The suspect’s phone has been disconnected and a spokesman for the U.S. attorney’s office said he did not know whether a defense attorney has been retained.
The National Credit Union Association began an unannounced examination of the credit union in January and interviewed the suspect about gambling activities. Examiners eventually found that about $10 million in non-member deposits were missing, an FBI special agent said in the court documents.
The deposits were made by other financial institutions into the Parsons-Pittsburg Credit Union account at Kansas Corporate Credit Union. Examiners found the majority of the missing deposits were diverted from the credit union accounts to other accounts controlled by the suspect, according to the filing.
The FBI found the employee and the employee’s spouse did not have any income that would explain the amount they spent at casinos in Oklahoma and Missouri during the past two years. A review of casino records filed between Jan. 20 and March 13 showed the former employee inserted $192,269 into gambling devices at casinos in Oklahoma and Missouri, and received $57,500 in cash payouts, court documents show.
Parsons-Pittsburg Credit Union, established in 1951, had 1,466 members and $13.4 million in assets when it was liquidated. All the losses were federally insured.
Golden Plains Credit Union of Garden City - with its 59,413 members and $418 million in assets - took over operations in March. As a larger entity, Golden Plains has more people to oversee accounting and reconciliation activities, said Erich Schaefer, member president for Golden Plains.
“But in a small credit union sometimes those things can occur without the checks and balances of a larger staff,” Schaefer said Monday. “A smaller credit union, or any kind of a financial institution that is small, has a limited staff. That can have an effect on the amount of dual control that is available.”
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