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FEBRUARY 1, 2017 | VOL. 28 | NO. 3 | CUTIMES.COM

Loyalty in the Digital Age Build trust through strategic marketing. y12

Auto Leasing Is leasing right for your CU? y9

etailers and credit unions can agree on two things when it comes to data security.

Data breaches are bad. And, Congress should pass leg-

islation to deal with data security. After that, the discussion de-

volves into a debate of the vari- ous interests each has in the issue. The result — nothing was accom-

plished on this issue last year. The debate not only pits retail-

ers against financial institutions, but congressional committee against congressional committee — never a good thing if you want to see legislation signed into law.

“I think it a tough issue because it breaks down along a lot of dif- ferent lines,” Brad Thaler, NAF- CU’s vice president for legislative affairs, said.

“This is a complex issue, with a diverse group of stake-

CUs, Retailers Fight Over Data Security DAVID BAUMANN [email protected]

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While indirect auto lending is growing in popularity, some credit unions have found that direct auto lending is a better method for gaining member trust and ultimately boosting their bottom line. Learn more in this Focus Report.  y8

FOCUSREPORT: AUTO LENDING

CU LEDGER

Blockchain Development

Grasping the possibilities of bit- coin, blockchain and distributed ledger technologies is a key com- ponent of CU Ledger, a current proof-of-concept project led by CUNA and the Mountain West Credit Union Association.

The project, initiated at last year’s CUNA National Credit Union Roundtable, an annual program run by CUNA and opened to members and non- members, aims to create a per- missioned, distributed, shared ledger platform for credit unions.

The MWCUA spearheaded the initiative after attending a block- chain technology presentation led by John Best, CEO of the Col- orado Springs, Colo.-based Best Innovation Group, and a CUNA consulting partner.

A blockchain is a public and distributed ledger of all executed bitcoin transactions. A distribut- ed ledger is a digital record of ownership that does not include a central administrator or central location for stored data. Accord- ing to the CU Ledger group, the original intention of bitcoins was for them to be decentralized and relatively anonymous. Propo- nents of blockchain technology believe it could introduce trust and transparency to any online transaction.

What the CU Ledger group found particularly attractive last year is that a distributed ledger keeps track of the same informa- tion on a large number of differ- ent servers, Bill Hampel,  y17

Fraud Case Unsolved 3 Yrs. Later PETER STROZNIAK [email protected]

fter fraud is uncovered at a credit union, it typically takes several months for the FBI to

conduct an investigation and file charges.

However, in one suspected $10 million credit union embezzle- ment case, three years have gone by without an indictment.

At least one former board mem- ber is puzzled over why the case has not been prosecuted, though some experts say this case may never be. Nevertheless, an FBI spokesperson said the investiga- tion is ongoing, but she declined to comment whether an indict- ment was imminent.

On Jan. 24, 2014, the Kansas De- partment of Credit Unions placed the $13.3 million Parson Pittsburg Credit Union into conservator- ship because of the cooperative’s unsafe and unsound practices. An FBI investigation revealed $10 million in non-member depos- its were missing and the majority of those funds were diverted into accounts controlled by its for- mer president/CEO Nita Nirschl. What’s more, Nirschl also was a high-stakes gambler who wagered millions of dollars in Oklahoma and Missouri casinos, according to a 20-page affidavit detailing the FBI’s investigation filed in

EMBEZZLEMENT

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Must Reads

CONGRESS

Key Takeaways y Credit unions and retailers attempt to find

common ground on data security legislation. y Data breach reporting obligations should be

the same for everyone. y Both sides are optimistic they can get a new

law passed this year.

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cutimes.com | Credit Union Times | February 1, 2017 | 19

U.S. District Court in Kansas City three years ago.

Nirschl did not respond to a CU Times interview request.

After the credit union was placed into conservatorship, it was merged into the $584 million Golden Plains Credit Union in Garden City, Kan. According to a local media report, Nirschl moved out of her home in Parsons, a small town of about 10,000 that was abuzz three years ago with rumors about the failed credit union.

Even though a lot of that small- town talk has died down, what hasn’t been forgotten is whether anyone will be brought to justice for the missing $10 million that led to the closing of the credit union and the loss of its six jobs.

“I don’t hear much talk about it,” Marty Mendicki said, who

served on the Par- sons Pittsburg board for 11 years and was its secre- tary. “But I get a few questions about it now and then. I’m frankly shocked we haven’t seen this resolved a long

time ago. We’ve had other em- bezzlement cases in the area and it seemed they were all handled within six months to a year while this has gone on for three years.”

Joseph Campbell, who worked at the FBI for more than 25 years,

including as an assistant director of the criminal investigative divi- sion, said there are multiple fac- tors that could delay charges or lead to them not being pursued.

Investigators could still be gath- ering evidence, the case could be connected to a wider compre- hensive investigation, or the evi- dence is not available to justify an indictment now, Campbell said, who is director of the global inves- tigations and compliance prac- tices at Navigant Consulting in Washington.

Branden Perry, a white-collar

criminal defense attorney in Kan- sas City, Mo., who specializes in federal inquires and investiga- tions, particularly in enforcement matters involving novel financial issues, noted the complexity of the case might have slowed down the investigation.

“In the FBI affidavit, multiple transactions (both in and out) of multiple bank accounts occurred and a tracing of funds may be complicated as well,” Perry ex- plained. “The forensic accounting investigators at the FBI have a dif- ficult job, but they are very good at it.”

One of the factors federal inves- tigators use to prioritize cases, he noted, is whether there is a “con- tinuing harm” being done to the public, organizations or custom- ers. Since the credit union was closed and member accounts were NCUA-insured, there was no continuing harm to the public. Because of this, federal investiga- tors could be doing a thorough, systematic and time intensive in- vestigation to ensure their case is sound, Perry said.

“The government, especially the federal government, brings criminal cases when there is little risk of losing at trial,” Perry said. “Any complications from any ele- ments of the crimes could delay or hamper the timing or the bringing of any action at all.”

Insufficient resources may be another reason the Parsons Pitts- burg case has not been prosecut- ed yet.

“Since the terrorist attacks in 2001, the FBI has shifted focus and agents from domestic issues, including white collar crime, to foreign-based terrorism preven- tion,” he said. “That is confirmed through a lengthy and steady de- cline in traditional cases being brought by the United States At- torney Offices.”

Whatever the reasons why the Parsons Pittsburg case has not been prosecuted, Mendicki re- called he and the board of direc- tors were shocked when they were told of the findings of an examina- tion conducted by state regulators and the NCUA.

“In this case, nothing should be unsolved,” he said. “Everything was cut and dry as it was present- ed to us.”

Other board members did not respond to CU Times’ requests for comment.

On April 9, 2014, an FBI inves- tigator filed a 20-page affidavit in U.S. District Court to convince a federal judge to issue a search warrant for Nirschl’s house and her safe deposit box at a local bank.

The FBI investigation was launched sometime after the NCUA made an unannounced examination of the Parsons Pitts- burg on Jan. 14, 2014. On that day, Nirschl was questioned by an NCUA examiner about her gam- bling activities. She told the ex- aminer that during 2012, she and her husband had winnings and losses of $16 million. The FBI affi- davit shows that during the month of September 2013, Nirschl made more than $500,000 in ATM trans- actions, electronic check transac- tions, ATM point of sale transac- tions and cash withdrawals at two casinos.

What’s more, during the NCUA interview, she had a bag that was filled with 500 IRS forms that doc- umented her gambling winnings, which totaled $4 million in De-

cember and November of 2013. It was not explained why Nirschl had the bag with her during the interview.

Although Nirschl told the NCUA examiner that she and her hus- band usually “break even” when they gambled, they kept $40,000 to $50,000 in cash at their home to draw on to cover their losing streaks. The source of this cash was from their gambling win- nings and her and her husband’s salaries.

Her husband, Jerry, was a re-

tired postmaster of the U.S. Postal Service and worked as a handy- man at a local school. His annual salary was not specified in court documents. However, accord- ing to the credit union’s IRS 990 forms, Nirschl earned $61,801 in 2013. In 2014, however, she re- ceived only $3,846 in compensa- tion, according to Parsons Pitts- burg’s IRS 990 form.

“The examiner asked Nirschl if she ever used credit union money to gamble with, and she replied ‘no,’” the FBI investigator wrote in the affidavit. “The examiner then asked if there were any depos- its that had been made into the credit union that were not record- ed properly on the credit union books, and Nirschl again replied ‘no.’”

During the interview, Nirschl told the examiner that she could produce copies of her tax returns

showing that she and her husband broke even from their gambling.

But the examiner informed Nirschl she was being placed on temporary paid leave until after the examination was completed.

But even when the examina- tion was under way and Nirschl’s job was on the line, she continued to gamble. Currency transaction reports filed by casinos revealed that Nirschl inserted $192,269 into gaming devices from Jan. 20, 2014 to March 13, 2014. The CTRs also showed that Nirschl received

$57,500 in cash payouts. When examiners from the

NCUA and the Kansas Depart- ment of Credit Unions completed their audit, they found $10 million in non-member deposits missing. These deposits were made by oth- er credit unions and banks into the Parsons Pittsburg account at Kansas Corporate Credit Union, which Nirschl had access to.

According to the affidavit, ex- aminers determined most of the $10 million was diverted from credit union accounts to accounts Nirschl controlled or an account associated with her husband.

Additionally, federal agents seized one bag of documents showing purchases of U.S. Savings Bonds, two boxes of tax records and financial statements, and two bags of IRS W-2G forms for gam- bling earnings. n

Mystery CONT. FROM PAGE 1

Key Takeaways y In January 2014, Parsons Pittsburg CU was

placed into conservatorship and later merged. y Examiners determined $10 million was

missing, triggering an FBI investigation that implicated a suspect.

y A board member is puzzled over why no one has been prosecuted after three years.

‘I’m frankly shocked we haven’t seen this resolved a long time ago.’

‘Any complications from any elements of the crimes could delay or hamper the timing or the bringing of any action at all.’

Mendicki

CUT_2-1-17.indd 19 1/26/17 12:37 PM

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