STUDIO CITY, Calif.–A $21-million credit union has been liquidated here as the result of what prosecutors allege was a two-decade long embezzlement of more than $40 million. The ex-CEO who allegedly led the scheme said his prior experience as an NCUA examiner helped him avoid detection.
That a team from NCUA arrived on a Friday afternoon to close a troubled credit union isn’t unusual—but the circumstances surrounding the shutdown of C B S Employees FCU are.
The U.S. Attorney’s Office said Edward Rostohar, 62, CEO of C B S Employees FCU, was arrested at his home in connection with embezzlement of funds to pay for a gambling habit, buy luxury cars and watches, and travel by private jet. Rostohar was ordered detained after a judge found that he was a flight risk and an economic danger to the community, according to the United States Attorney 's Office for the Central District of California. Rostohar has been charged with two felony counts: bank fraud and aggravated identity theft.
An arraignment is set for April 18.
NCUA said it liquidated C B S Employees and discontinued its operations after determining the credit union was insolvent with no prospect of restoring viable operations on its own. The credit union, which had 2,798 members, was chartered in 1961 to serve employees of several venerable names in the entertainment industry, primarily broadcast network CBS, as well as Mary Tyler Moore Productions and CBS/MTM.
This image shows cash the Los Angeles Police Department said it recovered from Edward Rostohar.
The CU’s assets and members have been merged into Los Angeles-based University Credit Union, which has 37,057 members and assets of $654,577,105. The credit union's webpage now redirects to that of University CU.
A Black Eye for CUs
For credit unions, the news of the huge embezzlement is a public black eye, with the story being reported nationally, including in entertainment industry publications over the weekend. Moreover, for many credit union executives it once again begs the questions about where was the regulator and how could an embezzlement of such size go on for so long? The alleged embezzlement is just the latest in a number of similar crimes at credit unions reported by CUToday.info, such as the $20 million theft by Michael LaJoice, CFO at Clarkston Brandon Community CU in 2016, a $5 million embezzlement at Parsons Pittsburg CU in Kansas in 2017, and a $13 million embezzlement at Lynrocten FCU in the years leading up to its 2013 liquidation, along with a multitude of other such crimes in recent years.
According to the U.S. Attorney's Office, Rostohar would make online payments to himself from the credit union by forging the signature of a fellow employee on checks made out to himself. The alleged embezzlement began sometime before 2000 and continued until March 6, 2019 when prosecutors say a credit union employee found a $35,000 check made out to Rostohar without a reason listed for the high-dollar amount, the U.S. Attorney's Office reported.
An employee who conducted an audit found $3.7 million in checks had been made out to Rostohar since January 2018, the U.S. Attorney said. Rostohar was suspended shortly afterward.
CBS Employees FDU was located in this building in Studio City, Calif.
Wife Dials 911
Rostohar was arrested after his wife called 911 to say her husband had stolen money from his employer and was about to leave the country, prosecutors said, adding prosecutors said Rostohar acknowledged stealing money from the credit union for 20 years. The U.S. Attorney said in its statement an audit conducted by NCUA on Feb. 28 revealed the potential loss to the credit union to be $40,541,130, a figure reported by several media outlets. NCUA, however, told CUToday.info it has not confirmed the figure and is not providing comment at this point.
"Prior to his 30 years of employment at the C B S Employees Credit Union, Rostohar was an examiner at NCUA, court documents state," the U.S. Attorney said. "Rostohar allegedly told law enforcement that this background gave him knowledge of what NCUA examiners look for when examining credit unions and allowed him to avoid detection, the affidavit states. Rostohar allegedly said he gambled away much of the money and spent the rest on traveling by private jet, buying expensive watches, and giving his wife a weekly allowance of $5,000. He also said he purchased two cars – a Porsche and a Tesla – with money he stole from the credit union, court papers state. Rostohar allegedly also admitted to starting a business in Reno, Nev., in December 2018, and he wrote tens of thousands of dollars’ worth of checks to himself to cover the business’s cost as well as to pay a $5,000 monthly mortgage on a home in Reno he recently purchased."
Up to 30 Years in Prison
If convicted on both charges, Rostohar faces a statutory maximum sentence of 30 years in federal prison and a $1 million fine on the bank fraud count and a mandatory consecutive term of two years in federal prison on the aggravated identity theft count.
Prosecutors said in addition to NCUA, the FBI and the Los Angeles Police Department are involved in the investigation.
C B S Employees CU’s 2018 year-end 5300 showed net income of $120,541.