The disclosure by Federal prosecutors that former Municipal Credit Union CEO Kam Wong was in illegal possession of a “controlled substance” during a crime spree in which he embezzled several million dollars from the credit union has prompted several of its former board members to go back to court to challenge their dismissal by state regulators.

After Mr. Wong’s arrest by the FBI in May, the MCU’s board of directors at its June 19 meeting terminated him. He had been placed on paid leave three months earlier while the investigation was proceeding, and the credit union’s second-ranking official, Norman Kohn, was named as acting president/CEO.

State Booted Board

After Mr. Wong was fired in June, the 10-member board of directors was dismissed by Maria Vullo, the Superintendent of the state Department of Financial Services, “due to severe deficiencies” in their oversight of the nonprofit, cooperatively owned credit union.

Seven of the board members filed the challenge—which is still under seal—in New York State Supreme Court in Manhattan. One plaintiff was Tony Abdullah, a former MCU board member who joined in 2016, and is currently the Chief Officer of the New York City Transit Rail Control Center.

Credit-union board members serve as volunteers who are elected by members. Collectively, the board of directors represents decades of public service as city employees and also includes longtime union members.

The directors’ suit alleges that they were summarily dismissed without required due process, including an administrative hearing at which to defend themselves against the allegations that were publicly leveled by Albany regulators. The suit maintains that the termination came just as the board was making progress in its own internal investigation that started back in January when it was served with Federal subpoenas in the Wong case.

Judge Denied Motion

On Oct. 25, Justice Melissa Anne Crane denied the former directors’ motion. Veteran labor attorney Stuart Salles is handling the appeal. In a statement made when the directors’ suit was filed, the Department of Financial Services said it declined to comment on “ongoing regulatory actions.”

One former board member who is a plaintiff spoke with this newspaper but asked for anonymity because the litigation was still under seal. “We want to clear our names because Mr. Wong’s actions come as a complete shock to us, and just as we were finally getting to the bottom of the scandal we were forced out by the regulators,” he said. “But it is not just about our reputations. We are concerned that there are people that are still on the inside in the credit union that either knew, or should have known what was going on.”

“I commend those former MCU board of directors members that continue to press for their day in court and hopefully in the process bring more transparency to an internal process for the members and the public,” said Bob Croghan, president of the Organization of Staff Analysts, a longtime credit-union activist. “But the former members can’t escape the reality of this massive scandal which unfortunately happened on their watch.”

Supervisory Panel’s Role

In addition to the board of directors, the MCU was overseen by an independent Supervisory Committee, whose members are also elected by credit-union members.

Supervisory Committee members also were “an extension of the regulators and have a fiduciary responsibility” to protect the credit-union members, according to a letter written in the 2016 annual report by Giovanni Porcelli, a retired member of the NYPD, who served as chairman of the Supervisory Committee.

In addition to Mr. Porcelli, a 2017 annual report listed as Supervisory Committee members Joseph Guagliardo, also a retired member of the NYPD; Karen Lucas, Amelia Coaxum and Cheryl Wright.

The Supervisory Committee was also terminated by the Superintendent of the Department of Financial Services after Mr. Wong’s arrest.

At a Nov. 19 court appearance before U.S. District Judge John G. Koeltl, Mr. Wong pled guilty to embezzling millions of dollars from the credit union between 2013 and 2018 by deceiving other credit union employees about the terms and conditions of his employment contract which enabled him to vastly inflate his compensation and fringe benefits.

Was Someone Complicit?

Considerable mystery still surrounds the central question of how Mr. Wong’s ongoing criminal scheme could be pulled off in the highly regulated credit union that has multiple layers of internal oversight and regulatory scrutiny from Albany and the National Credit Union Administration, which not only insures credit union accounts but regulates their operations.

While there was no reference to a potential criminal conspiracy in Mr. Wong’s plea agreement, in several places in the filings describing his criminal actions, prosecutors referred to him “agreeing with one or more others to engage” in the actions to which he pled guilty.

In addition, Mr. Wong signed off on a plea agreement which disclosed he had made “donations to charitable organizations in violation of the credit union’s conflict of interest policy” and that he had been in “possession and purchased from a former Credit Union Supervisory Committee member and his spouse a controlled substance for personal use.”

Past efforts to reach out to Mr. Porcelli and Mr. Guagliardo, the only male members of the Supervisory Committee at the time, were unsuccessful.

Mum on Probe Continuing

After the proceeding, Assistant U.S. Attorney Eli J. Mark had no comment when asked if the investigation was ongoing.

The government’s disclosure about his possession of a “controlled substance,” along with confirmation from three other sources close to the case, indicate that Mr. Wong in addition to squandering millions of dollars on lottery tickets, may have had a drug addiction.

Tensions Between Panels

According to two sources on the board, there had long been tensions between the board of directors and the Supervisory Committee, which was responsible for overseeing a team of internal auditors who were certified fraud examiners.

That critical function was described in detail in a 2016 MCU annual report.

“We do this with the assistance of two departments: Internal Audit and Security & Fraud. In 2016 the Internal Audit Department conducted 51 integrated audits of various areas of the Credit Union, including Operations, Compliance, IT and Finance. In addition to these efforts, one special review and five information security reviews were conducted,” wrote Mr. Porcelli, the chair of the Supervisory Committee at the time.

“I’m pleased to report that these efforts proved to be successful. By the year’s end, the Security & Fraud Department handled 1,028 cases of theft and fraud and successfully recovered $176,349 from criminals who perpetrated crimes.”

A second former member of the board of directors, who wished to remain anonymous, said that regulators also shared culpability for Mr. Wong’s embezzling going on for so long. “Every year you had the Albany regulators and the NCUA physically at the credit union from March to May on the ground,” he said.

Those visits also generated annual audits upon which the volunteer board of directors relied.

Big Earners Remain

According to the 990 IRS tax forms available from 2016, Mr. Kohn was making $655,000 in salary and bonus and more than $40,000 in additional compensation.

Thomas Siciliano, the credit union’s general counsel, received more than $611,000 in salary and $40,000 in additional compensation.

Mr. Siciliano and Mr. Kohn, both longtime credit union officials, remain employed at MCU while several of the other high-earning officials are gone. Mr. Kohn has been at the credit union for 40 years, while Mr. Siciliano has served for 37 years. For several years Mr. Siciliano served as a member of the New York State Banking Board, which historically was the MCU’s state regulator.

In 2011 that regulatory function was transferred to the Department of Financial Services when Governor Cuomo and the State Legislature merged the State Banking Board and the New York State Insurance Department.

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