LOS ANGELES – A federal court yesterday awarded CUNA Mutual Group’s CUMIS Insurance Society unit a $1 million default judgment from a former credit union executive who wrote more than $970,000 of checks on Chaffey FCU to pay her mortgage, income taxes and travel expenses and to pay off personal credit cards.

The judgment will reimburse the credit union insurer for the $910,000 payout on a bond it paid to the Ontario, Calif., credit union, as well as legal expenses incurred to investigate the case against Carol Ferraro, who worked for 19 years as executive vice president at the credit union.

The credit union estimates the total loss from the embezzlement at $970,000.

Court records in a civil suit filed by CUMIS to recover the funds shows that Ferraro began her embezzlement scheme in Oct. 2006 and continued to write fraudulent checks until she was fired in April 2011. During that time she used credit union money to pay her mortgage with Wells Fargo, her income taxes owed the IRS, credit cards with Capital One, Target, Bank of America and Bank of West, bills at Thousand Trails Campgrounds and All American Trailers, and debts owed Verizon Wireless, Sears, Lowes and Allstate.

The credit union exec used her high-level clearance with the credit union to issue credit union checks drawn on members’ accounts and manipulating those members’ accounts to hide the scheme. She would allocate the debits to individual member’s accounts, then reverse the debits after the reporting dates passed.

The $100 million credit union discovered the embezzlement during its annual audit last July.


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