With the arrest of a Brooklyn State Supreme Court Justice and a retired NYPD officer who served for years in leadership positions with the Municipal Credit Union for allegedly bilking it of hundreds of thousands of dollars, Federal prosecutors are widening their probe of the 103-year-old non-profit.
Based on the latest filings in the case, the alleged conspiracy goes back to 2009 and involves a state non-profit founded to promote Italian culture that honored Italian-American civil servants with awards at an annual banquet.
Wong’s $10M Fraud
In June, Kam Wong, the former CEO of the MCU, was sentenced to 5½ years in prison for defrauding it of almost $10 million. Seven months earlier, he pleaded guilty to stealing much of the money to play the lottery at two convenience stores near his Long Island home, wagering as much as $60,000 a month over a four-year period.
The MCU, one of the nation’s oldest credit unions, is a member-owned cooperative that serves public employees and their families. In May, state regulators took over the $3-billion credit union and turned it over to the National Credit Union Administration for conservatorship.
On Oct. 11, FBI agents arrested State Supreme Court Justice Sylvia G. Ash and charged her with obstructing the probe into Mr. Wong’s crimes by lying to investigators and destroying evidence in the case.
She is also accused of improperly getting tens of thousands of dollars from the MCU to cover personal expenses. Prosecutors allege that Justice Ash violated the MCU’s requirement that board members be volunteers and the state judiciary’s code of conduct requiring disclosure of income from extra-judicial activities.
She was an MCU board member from May 2008 until Aug. 15, 2016, and a trustee of its pension plan until Oct. 31, 2016. For 15 months, she served as the chair of the MCU board.
A Five-Year Gravy Train
Prosecutors charge that from 2012 through 2016 Ms. Ash “received annually tens of thousands of dollars in reimbursements and other benefits from the credit union, including airfare, hotels, food and entertainment expense for her and a guest to attend conferences both domestically and abroad, as well as payment for phone and cable bills, and electronic devices.”
Their complaint continued, “For example, in 2015 the Credit Union spent approximately $63,408 for the benefit of or at the direction of Ash, the most of any Board Director that year.” That covered conferences she attended in Cancun, San Juan, Las Vegas, Cuba and the Greek Isles.
In October 2016, the MCU paid for her trip to a credit union conference in Las Vegas with a guest, covering $3,800 in hotel, airfare, food and entertainment expenses, including three tickets to a Britney Spears Concert at Planet Hollywood.
In a statement to the New York Times, her lawyer, Roger Archibald, said she maintained her innocence. He said that the reimbursements she received were legal and that nothing she received was “above and beyond what every other board member received.”
Say Ex-Cop Got $500G
Also arrested was Joseph Guagliardo, a retired NYPD officer who joined the MCU Supervisory Committee in 1993 and held the post until he was removed by state regulators on May 24, 2018.
“From at least in or about 2009, up to and including at least in or about May 2018,” Mr. Guagliardo “and others known and unknown willfully and knowingly” conspired to embezzle from the MCU, prosecutors charged. They said he siphoned in excess of a half-million dollars through a security company he created and a non-profit organization he founded in 1975 to promote Italian culture.
FBI agents discovered approximately $41,000 in cash in Mr. Guagliardo’s Brooklyn bedroom closet.
John Arlia, Mr. Guagliardo’s lawyer, did not return a call for comment.
Under the MCU governance structure, Supervisory Committee members who are unpaid, are elected by members. The Supervisory Committee members are “an extension of the regulators and have a fiduciary responsibility” to protect the credit-union members, according to a letter written to members in the 2016 annual report by Giovanni Porcelli, a retired member of the NYPD, who served as chairman of the oversight panel until he and Mr. Guagliardo were both removed by regulators.
While Mr. Guagliardo was on the Supervisory Committee, prosecutors said he served as “vice president of the Credit Union’s security and fraud department while position was vacant.”
From September 2008 through September 2018, Mr. Guagliardo allegedly arranged with Mr. Wong to have the MCU pay his non-profit $300,000 to host an annual dinner in Brooklyn “to honor Italian civil service members” at which the ex-cop was master of ceremonies.
From 2011 through January 2018, the government alleges Mr. Guagliardo “and others known and unknown” conspired “to violate the narcotics laws of the United States” by illegally distributing hydrocodone. The government disclosed that some of Mr. Guagliardo’s drug inventory came from his spouse, who worked as a dermatologist at a public hospital.
In addition, prosecutors charge that he obtained hydrocodone and codeine for Mr. Wong from “another doctor who maintained a practice in Staten Island and was affiliated with the New York City Police Department.”
Even as Federal investigators were closing in, prosecutors allege Mr. Guagliardo was conspiring with Mr. Wong. “On or about January 18, 2018, the next morning, before Kam Wong was first interviewed by investigators, Mr. Guagliardo texted Wong, ‘I’m always loyal to you, but people have to start responding so we can protect ourselves from more than regulators.’ ”
After Mr. Wong was placed on administrative leave from the MCU, Mr. Guagliardo “made efforts to attempt to impede the internal investigation, including seeking to terminate the outside counsel that was overseeing the internal investigation, at the request of Wong,” the court documents charged.
Word of new charges did not surprise longtime credit-union member Robert J. Croghan, chairman of the Organization of Staff Analysts. More than a decade ago, he and a group of reform-minded credit-union activists were locked in an internal battle over the MCU’s nominating process with Mr. Guagliardo and his supporters.
“They finally figured out what he was doing,” he said in a phone interview. “I was disturbed by his behavior years ago, and that was why we had a very large fight for a couple of years over this.”
The OSA chairman said that the integrity of any credit union relies on three levels of oversight: the professional workforce in the institution, volunteer board members, and the regulators. “Here, you really have the failure of all three,” he said.
The MCU, which was founded in 1916 to help city employees who otherwise might have been forced to borrow from payday lenders, is the 84th-largest in the nation, according to NCUA data.
Unlike commercial banks, credit unions are supposed to use operational profits to reduce fees for customers.
In June of last year, a survey by this newspaper of the 990 Federal tax filings for several credit unions of comparable size indicated that MCU’s executives were being unusually well-compensated.
According to the 990 IRS tax forms available dating from 2016, MCU’s top officers were making in excess of $700,000 in annual compensation.
By comparison, the CEO for the Navy/Army Community Credit Union was paid $420,000 and the Chief Financial Officer got $176,000 in total compensation. Compensation for vice presidents at the State Employees Credit Union of Maryland averaged $300,000.
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