New Year, Same Issues
As we've done at the start of each new year, we took time away from the blog. During our absence we did observe that things seemed uncharacteristically quiet at Priority One Credit Union with nothing publicly said about the lawsuit filed by the credit union and its insurance carrier and bond company, CUMIS Insurance Society, against former external auditor, Turner, Warren, Hwang and Conrad nor was anything disclosed about the lawsuit filed by Turner, Warren, Hwang and Conrad against the credit union. The seeming quietude was completely out of character particularly when one consider that CUMIS' lawsuit and that of Turner, Warren, Hwang and Conrad, were scheduled to go to trial this past January. As the last nine years 7 years have taught us, when things are unusually quiet at Priority One Credit Union it is because something is sorely awry. As it turned out, we were correct and at the start of 2016 it is apparent that this is a new year with the same issues plaguing a credit union that has been brought to the point of ruin by it's dishonest and incompetent President, Charles R. Wiggington, Sr., and the corrupt and useless Board of Directors.
A "NEW" BUT TIRED FACADE
In November 2015, there were murmurings at the main branch in South Pasadena, California, that the Board of Directors had gown weary at the number of lawsuits filed against the credit union by former employees, members, by a formerly contracted automobile broker and by the credit union's former external auditor. In fact, the Board allegedly had become concerned by the immense amounts spent on "legal" since 2010. The amount spent on attorneys each year has quadrupled since Charles R. Wiggington, Sr. was appointed President on January 1, 2007.
Another concern has been the incidences of internal thefts all occurring at the Los Angeles branch and have included the theft of more than $60,000 by a former receptionist in 2009 and more recently, the theft of more than $1 million in cash discovered in February 2013 and allegedly embezzled by former AVP, Lynnette Fortson.
In late 2015, the Board was also informed by the credit union's attorneys and consultants that over the past nine (9) years, the credit union's public image and reputation had suffered as a result of the illegal and unethical acts committed by the grossly incompetent President. Furthermore, he had been continually protected and allowed to escape retribution by corrupt Board Chair, Diedra Harris-Brooks.
The Board was also informed that the Board's four Directors had historically proven they are subservient to Mrs. Harris-Brooks, allowing her to implement agendas that had proven harmful to the credit union, both as a business and employer.
The Board and Supervisory Committee were also informed that the thefts occurring at the Los Angeles branch suggested that neither governing body was monitoring the credit union's security protocols and ensuring these are being implemented by all employees on a daily basis.
Earlier this year, Mrs. Harris-Brooks and President Wiggington made a feeble effort to dispel the impression that the Board is comprised of ineffective and unethical Directors. And so, Mrs. Harris-Brooks allegedly amended the credit union's by-laws and added two new Directors which increases the number of Directors from five (5) to seven (7). Prior to January 1, 2007, the date the Board appointed Charles R. Wiggington, Sr. President, the Board consisted of seven (7) Directors but the President and Board Chair had in recent years reduced the number of Directors to five (5) because according to President Wiggington, he and the Board Chair needed to Directors who were willing to support the changes he and Board Chair hoped to make and that would serve to make Priority One a larger, more financially prosperous credit union. What he should have said is that he and the Board Chair needed Directors who are pliable to the whims of this dishonest duo. This year, two new Directors were added to the Board- Tyree Jackson and Art Now. The Board now consists of 6 Black Directors and 1 Latin Director.
In late January the NCUA published the credit union's Financial Performance Report showed that the credit union's asset size had increased slightly and President Charles R. Wiggington, Sr. was quick to point out that Priority One is experiencing, in his opinion, a resurgence in new business and growing. Of course, the credit union's asset size remains approximately $14 million less than what it was on January 1, 2007, the date Charles R. Wiggington, Sr. began his notorious appointment as President. Furthermore, since mid-October 2010, Priority One was forced to divest itself of six branches so it could remain solvent and in business. Less is sometimes more though in the case of Priority One, less always serves as a testament to the business failures of the chronically inept President.
The Holiday Toy Drive
On December 8, 2015, the credit union and the South Pasadena Chamber co-hosted a Holiday Party/Toy Drive at the credit union's main branch in South Pasadena. The affair was certainly quieter than that conducted in 2014. There were less attendees, less carousing under the mistletoe and less alcohol consumption. Notably missing was the presence of children. Here are some photos of the event.
Charles R. Wiggington., Sr.
Rodger Smock, EVP
A photo of the rather spartan open bar
[Photos Courtesy of Pasadena Now]
The Mystery of the Vanishing Lawsuits
So who embezzled more than $1 million in cash?
The credit union's quieter persona during the past four months is purely superficial. In February 2013, President Wiggington ordered the closure of the Los Angeles branch and posting of a notice on the branch's doors informing visitors to the location that the office was closed due to a "power failure." The closure was a not-so-clever ruse by the President to try to deter attention that the branch was closed during which the internal auditor, Diane Huffman, reviewed branch records. When the branch reopened, former Vice President, Yvonne Boutte, called the South Pasadena branch and violating the credit union's policy governing confidentiality, informed her friend and subordinate, Credit Resolutions Supervisor, Alex ("Alejandra") Suarez, that the auditor discovered that large amounts of money had been stolen from the Los Angeles branch's vault by AVP, Lynette Fortson.
Ms. Boutte threatened the staff of the Los Angeles branch with immediate termination if it was discovered that they had communicated with Ms. Fortson during or after working hours. Yes, the threat was illegal, but Mrs. Boutte was known to be a totalitarian.
Over the weeks which followed discovery of the thefts, the President would infrequently refer to the incident stating that the credit union knew who stole the money and that Ms. Fortson would be arrested, indicted, tried, and eventually prosecuted.
In March 2015, the following article regarding the incident, was published by the CU Times:
$1M Vault Pinch Hits Priority One
By David Morrison
March 07, 2015
A long-time employee of the $146 million Priority One Credit Union allegedly stole more than $1 million, according to a legal complaint filed by the CUMIS Insurance Society against the credit union’s former accounting firm.
The complaint alleged the credit union’s manager of its Los Angeles branch, Pearl Lynnette Fortson, began to remove cash from the branch’s vault in late 2010 and allegedly falsified daily reports to hide loss.
Fortson was hired by the credit union on Aug. 1, 1974, the complaint said, and Priority One fired her on Feb. 26, 2013.
The complaint said the credit union discovered the embezzlement in February 2013 and claimed that other people may have been involved. CUMIS said it reported Fortson to law enforcement, but did not say how law enforcement had responded. The credit union had not yet responded to calls for information on the Fortson case and CUNA Mutual said it had no further information.
Priority One filed a dishonest employee loss claim with CUMIS, for which the insurer paid just a little more than $980,000 after the credit union’s deductible, and settled the claim. CUMIS then sued Turner, Warren, Hwang and Conrad Accountancy, the Burbank, Calif., firm that had audited Priority One’s books since 2008.
CUMIS charged the accounting firm with negligence in its auditing the credit union’s books and operations.
“Defendant TWHC knew or should have known that Fortson was employed at the Priority One Los Angeles County Branch and that one of her duties was to perform reconciliations for that branch,” CUMIS argued in its complaint.
“Defendant TWHC knew or should have known that Fortson maintained singular control over the vault and vault balancing sheets for Priority One’s Los Angeles Branch,” CUMIS added.
“If defendants had ever opened the vault, counted the vault cash, reconciled the counted vault cash to the general ledger account or reviewed the balancing sheets prepared by Fortson during the course of their reconciliation of cash accounts, the fraud and embezzlement scheme would have been discovered by defendants,” CUMIS added.
Turner Warren referred calls about the case to its attorney, Randall Dean of the Los Angeles firm of Chapman, Glucksman, Dean, Roeb and Barger.
Dean declined to comment at length on the case but said the firm considered it entirely without merit, adding that Turner Warren planned to fight it at trial in June of this year. He also noted that Priority One had not brought the suit and had not expressed any disappointment with the firm's actions.
Source: CU Times Article
In CUMIS lawsuit, the actual date when the series of thefts began is stated as occurring in "early or late 2010." Could CUMIS have been more uncertain?
The following key points were made by the CUMIS to the CU Times reporter:
- The embezzlement was discovered in February 2013, approximately three years after the robberies began.
- Ms. Fortson was reported to law enforcement which is not synonymous with being arrested.
- Priority One filed a dishonest employee loss claim with CUMIS in the amount of approximately $1 million but after paying a deductible, CUMIS paid "a little more than $980,000."
- CUMIS sued Priority One's external auditor, Turner, Warren, Hwang and Conrad, because of negligent auditing which did not meet state mandated auditing standards.
- CUMIS insisted that Turner, Warren, Hwang and Conrad "should have known that" that Ms. Fortson was responsible for performing branch reconciliations.
- Turner, Warren, Hwang and Conrad "should have known that" Ms. Fortson maintained "singular control over the vault and vault balancing sheets" for the Los Angeles branch.
- Turner, Warren, Hwang and Conrad never "opened the vault, counted vault cash, reconciled the counted vault cash to the general ledger account or reviewed the balancing sheets" for if they had, "the fraud and embezzlement scheme would have been discovered"by the external auditor.
With the certainty that CUMIS and the credit union knew for a fact who was responsible for the thefts, it came as no small surprise that on December 16, 2015, CUMIS' attorney filed a Motion to Dismiss with prejudice, the lawsuit filed against the alleged embezzler, Lynnette Fortson. So what about CUMIS' statements to the CU Times or the disclosures verbalized by Mrs. Boutte and the President?
So why would CUMIS file a motion to dismiss when it was they who revealed to the CU Times that Pearl Lynnette Fortson absconded with more than $1 million?
Ms. Fortson proved to be more clever and even shrewder than the credit union's and CUMIS' attorneys. Following the filing of CUMIS' lawsuit against Ms. Fortson, responded and moving quickly, filed for bankruptcy. Clearly, she understood that if she were tried and found guilty, the court could order restitution. However, if she could be granted bankruptcy, then she could not be ordered to pay restitution.
BANKRUPTCY REPORT
Pearl Lynnette Fortson
- Case:
- 2:14-bk-24370-WB
- CH:
- 7
- Filed:
- July 29, 2014
- Discharged:
- November 17, 2014
- Address:
- URL:
- http://www.bankruptreport.com/ca/inglewood/fortson-pearl-lynnette
- Bankruptcy:
- Filed
What President Wiggington, the credit union's Board of Directors and Supervisory Committee and CUMIS have always avoided explaining is how more than $1 million in cash were embezzled over an approximate 24-month period without the President Wiggington, the Board of Directors, the Supervisory Committee, a COO, a CLO, a CFO, the Accounting Department, the internal and external auditor ever noticing any of several thefts.
Furthermore, Turner, Warren, Hwang and Conrad were contracted to usually perform an end-of-year audit. Wasn't anyone other than Turner, Warren, Hwang and Conrad auditing credit union branch records? This is highly unlikely.
What's more, CUMIS told the CU Times reporter that Ms. Fortson had "singular control" over vault cash and vault balance sheets. How is it possible that she possessed singular control? Credit Union dictates double-custody when branch vaults are entered. And how did she physically remove thousands of dollars in cash, each time she allegedly removed money from the vault without anyone in the branch ever noticing? Aren't their cameras located just outside the vault?
CUMIS also told the reporter that Ms. Fortson may have had accomplices but to date, no verification of this has ever emerged.
Additionally, there are no records any action being taken against Ms. Fortson, including a record that she was ever arrested.
THE MOTION TO DISMISS
Here is a copy of the proof of service (delivery) submitted to the court by CUMIS' attorneys.
The December 16, 2015 Request for Entry of Dismissal was filed with prejudice for the all actions originally filed against Ms. Fortson. "With Prejudice" means the lawsuit filed against Ms. Fortson is permanently being closed and no other action can ever be filed against her on the same claim. According to the sate of California, three possible reasons for requesting dismissal of a case with prejudice are:
- The case was settled and the amount agreed upon was fully paid.
- The defendant named in the case is not the right person or business.
- The case has already been heard and decided upon before – for example, in another court.
Turner, Warren, Hwang and Conrad
“Defendant TWHC knew or should have known that Fortson maintained singular control over the vault and vault balancing sheets for Priority One’s Los Angeles Branch,” - CUMIS, CU Times, $1M Vault Pinch Hits Priority One, David Morrison, March 7, 2015
In 2015, CUMIS showed no qualms in accusing Turner, Warren, Hwang and Conrad of negligence and of indirectly, allowing the thefts of more than $1 million in cash to go unnoticed. Despite their public statements denouncing the external auditor, on December 15, 2015, CUMIS" attorneys filed another Motion to Dismiss, this time withdrawing the lawsuit filed against external auditor, Turner, Warren, Hwang. The external auditor in turn, filed a motion to dismiss their lawsuit filed against Priority One Credit Union. However, unlike the motion filed to dismiss the lawsuit against Lynnette Fortson, the motions filed by CUMIS and Turner, Warren, Hwang and Conrad were filed with prejudice. What this means is that they may refile their lawsuits at anytime in the future suggesting the motions were not the result of entering into settlement agreements.
So what happens next? Is there another suspect in this case who may have absconded with the $1 million? And will CUMIS continue its relationship with the credit union? After all, this is a credit union who under President Wiggington has been the subject of internal thefts and losses incurred as a result of its failure to adhere to its own security protocols.
How Long is Enough?
Last year we reported that President Wiggington had put his home in Echo Park/Silverlake up for sale. This is the same residence that he boasted about in years past including declaring that the property had been appraised to be worth more than $1 million, that it housed an extensive and valuable art collection and a large and impressive "tuxedo collection." The home is 982 square feet in size prompting us to wonder, where does he store his amazing collections.
His decision to sell his home followed an attempted robbery of his residence. A friend of his family informed us that he allegedly boasted to neighbors about the home's luxuriant trappings and it would seem, someone believed his far-fetched concoctions.
His decision to sell his home followed an attempted robbery of his residence. A friend of his family informed us that he allegedly boasted to neighbors about the home's luxuriant trappings and it would seem, someone believed his far-fetched concoctions.
As shown below, the home has now been on the market for more than 163 days which is a very long time for a home to remain unsold. Evidently, the President is experiencing as much difficulty in selling his home as he did trying to convince the court that the theft of $1 million at the credit union was the fault of shoddy auditing practices. If anyone is interested, give his real estate agent a call. Maybe he'll negotiate a reduced selling price.
Photograph of the house and trash cans
Conclusion
In 2013, President Wiggington and now former AVP, Yvonne Boutte, disclosed that evidence gathered by the credit union's internal and external auditors revealed that a large amount of money had been embezzled from the Los Angeles branch by former AVP, Lynnette Fortson.In fact, these two paragons of leadership and professional acumen declared that the evidence against Ms. Fortson was so telling and condemning that it would eventually result in her conviction.
In 2015, CUMIS Insurance Society told the CU Times that more than $1 million in cash had been embezzled from the vault of the Los Angeles branch's vault by Ms. Fortson. They also told the publication that the credit union's external auditor, Turner, Warren, Hwang, and Conrad failed to audit vault cash and vault balance sheets which impeded the discovery of disparities that would have revealed the thefts perpetrated by Ms. Fortson.
In spite of the allegedly vast horde of evidence gathered against Ms. Fortson and the fact that she allegedly stole more than $1 million in cash, last year, on December 16, 2015, CUMIS' attorney filed a motion seeking dismissal without prejudice of the lawsuit filed against Ms. Fortson. So what does the motion say about CUMIS' competency as an insurance and bond company or that of it's "specialists"?
What we also find peculiar is that even though she was publicly accused of stealing more than $1 million and terminated as a result of the theft, Ms. Fortson has never filed a lawsuit against Priority One Credit Union or CUMIS citing defamation or wrongful termination?
It is also strange that CUMIS also filed a motion to dismiss their lawsuit filed against Turner, Warren, Hwang and Conrad when they clearly made statements to the CU Times that the accounting firm been grossly negligent in auditing Priority One's records. It doesn't appear that the dismissals were the result of settlements entered into by CUMIS and Turner, Warren, Hwang and Conrad as the dismissals were submitted without prejudice which means the lawsuits can be refiled at sometime in the future.
And why was the evidence provided by CUMIS to the credit union and used to file a counter-lawsuit against Turner, Warren, Hwang and Conrad so imbued with issues that the court could not allow the lawsuit to proceed to trial?
Lastly, why is it that neither the credit union or CUMIS have ever explained how a series of thefts could occur over an approximate 24-month period without being discovered by President Wiggington, the Board of Directors, the Supervisory Committee, a COO, a CLO, a CFO, the Accounting Department, the internal and the external auditors? On a related note, in the years before Charles R. Wiggington, Sr. was appointed President, the Supervisory Committee would periodically visit all branches and count vault cash. Why did was this practice stopped?
Over the past 7 years, we've reported about the incompetence and unethical proclivities of the President, the Board of Directors and the Supervisory Committee. Under Charles R. Wiggington, Sr. there has been a chronic series of blunders borne out of his refusal and those of the two governing bodies to ensure security protocols are being performed by all employees. It would seem that the credit union just doesn't comprehend that security measures were developed to ensure the protection of member and credit union assets.
So how much did Priority One spend on litigation over this one incident involving the theft of more than $1 million? And why would CUMIS have paid the $1 million claim filed by the credit union even after Priority One has proven time and time again that they are guilty of negligence that has resulted in immense losses of member and credit union assets?
What Happened to Priority One Credit Union
How a corrupt President caused Priority One Credit Union's decline
http://www.piorityonecu.blogspot.com
This post first appeared on What Happened To Priority One Credit Union?, please read the originial post: here
