Former CEO pleads guilty to using false document to obtain TARP funds

Former CU CEO pleads guilty. (Source: Shutterstock)

Helen Godfrey-Smith, former president / CEO of the Shreveport Federal Credit Union, pleaded guilty Wednesday in federal court in Louisiana to fabricating and using a forged document linked to an alleged multi-million dollar fraud scheme by the CFO , leading to the liquidation of the credit union in 2017.

Godfrey-Smith, 72, of Shreveport, faces a maximum of five years in prison, three years on probation and a fine of up to $ 250,000. His sentencing hearing is scheduled for April 2022 in U.S. District Court in Shreveport.

In December 2016, Godfrey-Smith signed an agreement with the US Treasury Department’s Troubled Asset Relief Program and Community Development Capital Initiatives to repurchase $ 2,434,320 in senior subordinated securities. At the time she signed that deal, however, prosecutors said Godfrey-Smith was aware that there were millions of dollars in false entries in the credit union’s ledger and that his books were not balanced. Because she did not disclose this information, the former CEO signed and submitted a false document to the Treasury Department.

Had Godfrey-Smith disclosed this information, the buyout would have been suspended and SFCU would have kept the $ 2.3 million on its books. Instead, the credit union disbursed the funds and in the spring of 2017, the SFCU was wound up by the NCUA, prosecutors said in court documents.

Prosecutors noted that after Godfrey-Smith signed and submitted the agreement, it did not result in a financial loss for the SFCU, NCUA or the Treasury Department.

Court documents said the NCUA was also unaware that the SFCU was in a financial crisis in December 2016 when Godfrey-Smith signed the deal with the US Treasury, and that the NCUA subsequently discovered that the credit union had accumulated a loss of $ 10 million in December 2016.

However, as early as June 2014, the credit union was subjected to an NCUA resolution document, which required the SFCU to hire an external CPA to reconcile each account to the general ledger and produce an audit of the financial statements expressing an opinion on its financial statements. year-end financial statements. , according to court documents filed by the NCUA in a civil lawsuit.

Throughout 2014, NCUA examiners issued reports on a variety of serious accounting issues, including the failure of its de facto CFO, Alesia Smith Cummings, to understand generally accepted accounting principles and the accounting staff of the credit union did not understand how to properly reconcile general ledger accounts. The reviewers also identified many general ledger accounts that did not have documentation to support the balances listed in the call reports, and that management was unable to provide reviewers with reconciliations or supporting documents for the general ledger accounts requested.

In response to the DOR, the SFCU hired a Louisiana CPA firm, HMV, to address these issues. But the NCUA ended up suing HMV in federal court in April for alleged accounting malpractice.

In this civil lawsuit, the NCUA alleged that Cummings was engaged in a “long-term embezzlement plan on the part of the SFCU”.

At the end of 2016, the SFCU board of directors again retained HMV for another annual audit, but this was never completed because in the spring of 2017, the NCUA claimed that its examiners had discovered independently of the Cummings embezzlement plan.

The alleged fraud included posting fake deposits to an array of automated clearinghouse accounts receivable, such as undistributed payroll, accumulated vacation, and 401 (k) correspondence accounts. Cummings also allegedly created incidentals that were used to pay bonuses to employees, including large bonuses to Smith. The federal agency also claimed that Cummings embezzled funds by making transfers from ACH clearing accounts to her account, an account she jointly owned with a relative and other accounts owned by Smith, according to the federal agency. independent.

“As of August 31, 2016, the embezzlement and cover-up by Cummings had resulted in more than $ 13.1 million in outstanding ACH deposits listed in SFCU’s ACH clearing account,” according to NCUA court documents. “These fictitious ACH deposits were greater than the $ 13,014 million balance on SFCU’s corporate account with the Louisiana Corporate Credit Union.”

Federal prosecutors, however, alleged that Cummings, identified as “Individual 1” in court documents, embezzled approximately $ 1.5 million from the credit union.

In addition to the embezzlement of $ 13 million that led to the liquidation of SFCU in October 2017, it recorded a total loss of $ 17.6 million at the end of the third quarter of 2017, according to the financial performance reports of the SFCU. NCUA.

In interviews with CU time Last May, Godfrey-Smith, who was CEO of SFCU for 34 years, growing it from $ 1.9 million in assets to $ 102 million in assets, said she had no knowledge of what she described as the “horrible dishonesty” of a dishonest CFO. When she discovered the embezzlement in February / March 2017, Godfrey-Smith said she immediately fired Cummings.

Cummings passed away at the age of 51 on April 12, 2017, the day before the SFCU was retained by the NCUA.

The NCUA did not charge Godfrey-Smith with any wrongdoing in its findings which were reported in court documents in the civil lawsuit against HMV. Last July, a federal judge referred the NCUA-HMV civil case to the Caddo Parish Judicial District Court.

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