From Community Hero to $18.6 Million Credit Union Embezzler; July BSA Blast
Written by Shari R. Pogach, Regulatory Paralegal
The importance of internal controls to a credit union is illustrated by this disquieting case. A credit union's size and complexity is not representative of the severity of the potential risk if the wrong staff member gains access to critical controls.
Former Fenton businessman Michael LaJoice was honored in 2013 with a Fenton Community Hero Award for his charitable giving and helping others. In January 2016, the businessman and accountant walked into the Oakland County Sheriff's Office and stated that as the chief financial officer, he had embezzled about $20 million over a dozen years from Clarkston Brandon Community Credit Union. LaJoice was jailed in January on 14 counts of embezzlement charges.
How did he do it? Well according to court documents filed this June with the Eastern District of Michigan U.S. District Court, LaJoice started as an account manager and later became the credit union's chief financial officer in June 2015. He was responsible for the credit union's accounting functions, which included the financial statements, making general ledger entries and ACH transfers, tracking investments and reconciling the corporate account statements.
LaJoice issued cashier's checks from various accounts at the credit union without permission. These checks were then deposited into LaJoice's bank accounts at multiple other financial institutions. The checks were made payable to the financial institutions as well as to fictitious individuals and LaJoice typically deposited the checks by ATMs. The funds came from the credit union's investment general ledger, which LaJoice was responsible for balancing. Once the funds were in his accounts, LaJoice would clear the credit union's ledger to delete the corresponding transaction. He would then wire transfer the funds from his personal accounts to other accounts, including his business account.
By creating fictitious investments in certificates of deposits and bonds at a bank in Miami, LaJoice was able to hide his activities. These fictitious investments were given to auditors and state examiners conducting annual financial audits at the credit union to show that its books were balanced.
The court filing states LaJoice used the stolen monies to pay cash to build his new, custom-built home worth more than a million dollars, purchase several new vehicles and real properties, and to market his dance studio. LaJoice's attorney is continuing negotiations for resolution on the two criminal and two civil cases against LaJoice in federal and state courts.
Clarkston Brandon Community Credit Union was later merged into another Michigan credit union.
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BSA Blast. It's out! The July 2016 issue of the BSA Blast is available (NAFCU login required). Articles in this issue include: an overview of the Financial Crimes Enforcement Network's (FinCEN's) rule on customer due diligence requirements on beneficial ownership; and a recent enforcement action against a casino card club for repeated Bank Secrecy Act (BSA) violations. Included with newsletter is a new BSA quiz that can be used for training staff on the Customer Due Diligence rule.