Former credit union CEO accused of stealing over $10M pleads guilty to fraud in central Minnesota
ST. PAUL — A former Little Falls credit union CEO pleaded guilty to stealing at least $2.5 million following a five-year fraud investigation by the FBI.
Margurite Mary Cofell, former president/manager/CEO of the St. Francis Campus Credit Union in Little Falls, appeared at 10 a.m. Wednesday, April 3, in U.S. District Court in St. Paul on a criminal charge of felony credit union fraud, where she entered her guilty plea. Her next court hearing has not yet been set.
The FBI launched its investigation in January 2014, about three weeks before the Minnesota Department of Commerce closed the $51 million St. Francis Campus Credit Union in Little Falls on Feb. 14 of that year and appointed the NCUA — National Credit Union Administration — as the receiver and liquidating agent, the Credit Union Times reported.
However, the fraud was not publicly exposed until January 2016 when NCUA sued CUMIS — the insurance company — over its controversial decision not to pay the federal agency’s fidelity bond claim. The National Credit Union Administration filed a proof of loss with CUMIS for $3,086,755. CUMIS rescinded the fidelity bond agreement because Cofell lied on its application to extend the employee dishonesty coverage from $2.25 million to $2.75 million in April 2013, the Credit Union Times reported.
A forensic auditor hired by the NCUA alleged Cofell’s embezzlement scheme caused a loss of more than $10 million, leading to the collapse of the credit union.
Even after Cofell admitted in writing in 2014 — after she was confronted by NCUA examiners — that she began embezzling in the 1990s, the forensic auditor was only able to obtain complete transactional documentation from 2011 to 2014 because she allegedly destroyed the data processing system’s backup information prior to 2011, the Credit Union Times reported.
Based on the transactional documentation from 2011 to 2014, the forensic auditor was able to determine Cofell allegedly embezzled $3 million.
In 2017, the NCUA also filed a $2.8 million civil lawsuit against Cofell, who denied the federal agency’s allegations of civil theft, fraud and misrepresentation, unjust enrichment, conversion and failing to perform her fiduciary duty, the credit union story reported. This lawsuit is also pending in federal court.
Federal prosecutors filed one felony count of credit union fraud against Cofell Feb. 19, 2019, in U.S. District Court in Minnesota. Prosecutors alleged her scheme began in June 2006 and continued through January 2014 when she was fired.
Federal court documents state Cofell knowingly and fraudulently diverted credit union funds into her accounts and the accounts of family members and close friends by creating fictitious electronic deposits. The deposits increased the available balances of the member accounts and allowed them to make withdrawals of the credit union funds that were never actually contributed by the members.
Court documents filed also state Cofell created false supporting documents related to both legitimate and fraudulently-issued loans purporting to list the names, account numbers and amounts pledged by various credit union members as collateral for the loans.
According to the plea agreement, Cofell agrees to waive indictment by a grand jury on the fraud charge.
The felony count carries a maximum of 30 years in prison; five years of supervised release; an up to $1 million fine or twice the gross gain or loss generated by the offense, whichever is greater; a mandatory special assessment of $100, which is due before sentencing; and a payment of mandatory restitution in an amount to be determined by court.
Before the Little Falls credit union was shut down, it had 3,400 members. The NCUA reported the members had assets of about $51 million. Members of the credit union were transferred to the Central Minnesota Credit Union without an interruption of service. Central Minnesota, with 52,000 members, has a credit union in Little Falls, as well as 15 other locations.