Members sue board of failed CBS Employees FCU
Members of the failed CBS Employees Federal Credit Union in Studio City, Calif., have filed a class action lawsuit against the institution’s board.
The suit claims that the board failed to provide reasonable oversight of the credit union’s management team, according to the complaint. This allowed the institution’s former CEO Edward Rostohar to embezzle more than $40 million over 20 years, according to the complaint dated Aug. 7.
If Rostohar had not embezzled that money, the credit union could have used the funds to provide members with lower rates on loan, the complaint claims. The lawsuit claims that if the board had provided appropriate oversight then the embezzlement scheme would have been uncovered before Rostohar was able to steal more than $40 million.
The National Credit Union Administration liquidated CBS Employees in March because it was “insolvent with no prospect of restoring viable operations on its own.” At that time, it had just under 3,000 members and $21 million in assets.
University Credit Union in Los Angeles assumed the institution’s assets, loans and shares and is also named in the lawsuit. University Credit Union declined to comment.
Rostohar, who is a former NCUA examiner, was charged with bank fraud and aggravated identity theft earlier this year. He plead guilty in May to fraud. His scheme was discovered in March when an employee found a $35,000 check made out to Rostohar but the check did not include a reason for the payment. An audit revealed additional payments to Rostohar.