The NCUA (National Credit Union Administration) has failed members and taxpayers yet again (we know we’re starting to sound like a broken record, but someone needs to call it out). Alan Kaufman, CEO of Melrose Credit Union in New York (yes, the same Melrose that was liquidated after its participation in risky taxi medallion loans) was charged this week by the FBI with bribery on accounts of accepting free housing and lavish trips in exchange for the credit union purchasing increased advertising with a businessman’s company. This is just one example of a long list of financial crimes committed by credit union leadership over the past two years. Clearly, there’s a serious problem here.
In exchange for refinancing over $60 million in loans at Melrose to benefit the businessman and his company, Kaufman gladly accepted a variety of excessive kickbacks. To name a few: he lived in a home known as the “Jericho Residence” rent-free for over two years; he was given a trip to fly to Paris with his girlfriend and stay at the Four Seasons George V Paris Hotel (over $1,000/night, typically); he was flown to Maui with his girlfriend and stayed at the Four Seasons in Wailea (around $800/night); and he was provided two tickets to the Super Bowl in New Orleans ($2,500/each minimum). Based on the fact that many of these large credit union CEOs are making ridiculous $11 million salaries nowadays, Kaufman may have been used to this sort of lifestyle on his own. But sorry, Kaufman. There’s no excuse for accepting bribes, the law is the law.
By the way, if this businessman could afford to fly Kaufman and his girlfriend to France, Hawaii, and the Super Bowl on all-expenses-paid trips, he certainly wouldn’t be considered a person of “modest means.” So why was he a member of the credit union in the first place? This whole story just highlights underlying issues with credit union mission creep and the abandonment of their purpose for bigger profits and heavier wallets.
Additionally, the allegations claim that the businessman further bribed Kaufman by offering the naming rights to a ballroom he owned in Queens. Kaufman somehow convinced Melrose’s Board of Directors that paying over $2 million to earn the naming rights was a good use of the credit union’s assets, when really, he was just itching for another fun gift. Given this information, we can’t help but question the true intentions every other time a credit union has been granted the naming rights to major sports stadiums or events venues.
And where the heck was NCUA, the credit union industry’s so-called “regulator,” when all of this went down? It’s almost like the agency completely forgot to review Melrose altogether…or gave them a nod and a wink to keep doing business as usual. It’s one thing for the NCUA to miss the looming consequences of the faulty taxi medallion loans that led so many taxi drivers to bankruptcy (and worse), but it’s something else entirely for it to miss the CEO repurposing members’ hard-earned money to live rent-free and go on luxurious getaways. Kaufman’s behavior, which could have easily been prevented and punished had NCUA been paying any attention, added fuel to the strong fire that took down this credit union – and innocent members with it.
The fact that the FBI had to get involved in this case says everything. NCUA isn’t competent enough to identify the issues on its own, and because the agency acts as a kid glove regulator, it isn’t even brave enough to act once someone else points them out. The FBI has enough on its plate – it shouldn’t need to cover for an agency that sleeps on the job.
Accepting extravagant bribes to prop up a wealthy man’s fortune is quite literally the opposite of the credit union mission: to support underserved communities. If NCUA is going to stand back and allow CEOs who should be role models of fulfilling this mission to engage in this behavior, then Congress needs to find someone who can actually stand up to these abuses of power.