KAM WONG: Talking in bid for leniency?

NORMAN KOHN: Salary raises some eyebrows.

KIM THOMPSON: Was paid nearly $700G.

The Municipal Credit Union, whose longtime president and CEO has been accused of embezzling millions of dollars that he squandered playing the lottery and indulging a taste for high living, in recent years had been paying corporate-level salaries to other top executives, three of whom earned in excess of $600,000 in salary and bonuses during 2016, this newspaper has learned.

In one sign that Federal prosecutors may be looking to charge other individuals, court papers they filed June 7 indicate they are delaying a formal indictment of the disgraced MCU head, Kam Wong, which could be a sign he is cooperating with the ongoing investigation.

Seeking Plea Deal?

He was arrested May 7 and charged with siphoning assets from the MCU, which was founded more than a century ago. The Federal Government under law has 30 days from the time of an arrest to bring an indictment. Any extension in that time period must be agreed to by defense counsel; that apparent occurrence suggests a plea deal may be under discussion.

Following his arrest, Mr.Wong, 62, was released on $1-million bail secured against his Valley Stream, L.l. home.

The extension was first reported by the Credit Union Times.

Banned From Industry

On May 31 the National Credit Union Administration, the government regulator for the nation’s 5,500 credit unions, took the unusual step of banning Mr. Wong from the entire industry, a move experts said was normally taken after a criminal conviction.

“Kam Wong, the chief executive officer of Municipal Credit Union...was charged with the crimes of embezzlement, defrauding a financial institution, and wire fraud in the United States District Court for the Southern District of New York,” the NCUA said in a regulatory notice. “After determining that continued service or participation by Wong in the credit union’s operations may pose a threat to the interests of the credit union’s members or may threaten to impair public confidence in the credit union, the NCUA Board issued a notice prohibiting Wong from further participation in the affairs of any credit union.”

The MCU’s Board of Directors at its June 19 meeting terminated Mr. Wong as president and CEO. On Feb. 22 he was placed on paid leave and the credit union’s second-ranking official, Norman Kohn, was named as Acting President/CEO. “MCU has been cooperating with the U.S. Attorney’s Office and is conducting its own internal investigation led by outside counsel,” the board said in a statement. “In that these investigations are still ongoing, MCU cannot comment further at this time.”

How Credit Unions Operate

Credit unions are run as non-profit banking institutions that are owned cooperatively by depositors who vote for other members to serve as volunteers on the Board of Directors and Supervisory Committee that oversee the MCU’s operations. Members’ savings accounts are federally insured up to $250,000, and IRA accounts are separately insured for up to $250,000 by the NCUA.

The organization, which was founded in 1916 to help city employees who otherwise might have been forced to borrow from payday lenders, holds $2.68 billion in assets and has 425,000 members, according to its annual report.

According to the Money Summit website, NCUA data showed that in March, MCU ranked 84th in the nation in assets. The list was topped by Navy Federal Credit Union, with more than $90 billion in assets and 7.8 million members.

Mr. Wong had been with the MCU since 1981 and was made president in 2006 and given the CEO’s job in 2007.

Lost Millions Gambling

The charging documents indicate Mr. Wong was obsessed with the New York State Lottery, writing checks for $3.3 million at two convenience stores, primarily for lottery tickets. At one store located in Elmont near his home, investigators said he spent hours at a time on weekends playing the lottery.

From July 2013 through January 2018, Mr. Wong made 2,592 ATM withdrawals totaling $1.9 million, sometimes involving multiple transactions in a day, according to an affidavit filed by the lead Special FBI Agent handling the case.

A Disability Hustle?

According to documents filed with the court, Mr. Wong requested and got $3.6 million from the credit union in lieu of its providing him with long-term disability insurance, as well as $3.1 million to cover his taxes on the purported payout.

He also directed credit-union employees to pay $100,000 in living expenses, visa and tuition costs for two young relatives of a family friend of Mr. Wong's in Hong Kong.

In addition to these “numerous other payments made under suspicious or questionable circumstances,” he is alleged to have generated hundreds of thousands of dollars for himself by submitting phony dental-work invoices, the government alleged.

Mr. Wong also had the credit union lease him “multiple high-end luxury vehicles including a Mercedes Benz, a Maserati, a Gran Turismo and a Ferrari California T, according to prosecutors.

Evasive When Confronted

In January, Federal investigators contacted the credit union about the ongoing probe. Prosecutors allege that when Mr. Wong learned about the investigation, he attempted to “mislead Federal agents and Credit Union Board members in order to, after the fact, explain and justify some of these payments.”

While the court filings listed Mr. Wong’s annual salary as $684,137, the MCU’s 990 IRS form for 2016—available through GuideStar, the non-profit rating agency—listed his compensation as $5.88 million.

Last week at the MCU’s branch at 2 Lafayette Street in lower Manhattan, interviews with several customers indicated that despite publicity regarding the allegations, some members were unaware Mr. Wong had been arrested.

But Christian Williams, an MCU member who works for 311 as an Operator, said he had been following the case closely. “I would just hope that doesn’t trickle down to his subordinates," Mr. Williams said. "I still have faith in MCU. I have been banking with them since 2010 and I haven’t had any problems even with the scandal. But it does make me pay more attention.”

High-Salaried Subordinates

A survey of the 990 Federal tax filings for several credit unions of comparable, or even slightly larger sizes, indicate that MCU’s executives were being unusually well compensated.

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

Kim Thompson, MCU executive vice president for human resources and labor relations, made $622,000 plus $70,000 in other benefits.

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

Monique Smith, the MCU executive office manager, was paid $255,000 in salary and garnered $62,000 in additional compensation.

Others On Gravy Train

Several other employees in top posts were earning close to a half-million in combined salary, bonus and other compensation, according to the 2016 990 IRS forms.

A review of several of MCU’s annual reports indicate that salaries spiked between 2011 and 2016. In 2011 it paid $50 million for employee salaries and benefits. By 2016 the credit union spent $79.4 million, with Mr. Wong being the biggest beneficiary.

The credit union’s Supervisory Committee, like the Board of Trustees, is elected by members, and its members do not get paid. But 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 serves as chairman of the oversight panel.

“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,” Mr. Porcelli wrote.

Small Grifters Nabbed

“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…we will never give way to the increasing attempts to defraud our hard working members. This can be assured through our demonstrated work within the areas of Auditing and Security & Fraud, which have helped to make sure your assets remain safe and secure at Municipal Credit Union both now and in the future.”

In addition to Mr. Porcelli, the 2016 annual report lists other Supervisory Committee members Joseph Guagliardo, also a retired member of the NYPD; Karen Lucas, Amelia Coaxum and Cheryl Wright.

The Credit Union Times surveyed several industry experts, who raised questions about MCU’s vigilance.

'Controls Broke Down'

“In its 2016 annual report, the $2.8 billion Municipal Credit Union touted how its Internal Audit Department conducted more than 50 integrated audits in the credit union’s divisions of operations, compliance, IT and finance, and continuously audited the most sensitive areas of New York’s largest credit union by members,” reported the industry publication.

“Presumably, those audits included a review and testing of internal controls to detect and prevent internal fraud. But industry experts said those internal controls obviously broke down because of a serious lack of oversight by key personnel, the supervisory committee and the board of directors, which led to a multi-million-dollar fraud scandal by its CEO.”

James Durrah, a former Assistant Commissioner for Operations for the Department of Health and Mental Hygiene, is the MCU's chairman.

Other board members include: Ms. Smith, MCU's executive office manager; Beryl Major of Local 420 of District Council 37; Loretta Y. Jones, retired from the Department of Housing Preservation and Development; Mark S. Brantley, an attorney and Administrator in the Manhattan County Clerk's Office; Tony Adballah, Chief Officer of the New York City Transit Rail Control Center; Tessa I. Hackett Viera, from the DC 37 Legal Services unit; Mario Matos Jr., MCU's treasurer, and Shirley Jenkins, the first female MCU president, who is now a director emeritus.

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