Credit union’s future uncertain

Feb. 23, 2010

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

A New Castle-based credit union lost $3.4 million during the last three months of 2009.

“We have endured some losses. I can’t confirm the total amount,” said Kenneth W. Cotton, president of the credit union’s board of directors. “The entire situation is really a complete shock to the whole board.”

Federal auditors uncovered irregularities with Lawrence County School Employees’ Credit Union finances in late September.

The credit union, chartered in 1937, serves approximately 1,900 clients. Its members consist of county school district employees and their relatives.

“As of right now, we’re still in business,” Cotton said. “I want to reinforce that (members’) accounts are insured to $250,000. We’re trying to avoid panic at any cost.

“We currently have assets available to our members.”

Cotton said the credit union is working with the National Credit Union Administration and First Choice Federal Credit Union, located in Union Township, to assist with operations. The NCUA is a federal agency that regulates and charters credit unions.

“All we know is there are accounting irregularities,” Cotton said. “We had to write off some loans.”

Financial information obtained from the NCUA highlights problems in the fourth quarter of 2009.

Cash assets fell from $2.6 million in September to $152,000 at year’s end. During the same period, loan write-offs jumped from $6,600 to $770,000. Loss on investments reached $2.4 million in December. Conversely, no losses were reported between December 2008 through September 2009.

Cotton said the board is waiting for an auditor’s report, which will detail what took place and will recommend what actions the credit union should take.

Cherie Umbel, NCUA spokeswoman, said the report’s contents will not be made public.

A volunteer board oversees the credit union’s operations. Joining Cotton on the board are Joseph Croach, Brian Glass and Donna Pezzuolo.

“I’m just a figurehead,” Croach said. “We’re ignorant of what’s going on.”

Attempts to reach Glass and Pezzuolo for comments were unsuccessful.

Today the credit union’s staff consists of a teller, who declined to be identified. She said that the credit union’s chief executive officer, Holly Cowan, has not been in the office for the last five months. Cowan also served on the board.

“She no longer works for us,” Cotton said.

Stating that it was a personnel issue, he declined to discuss her departure.

Attempts to reach Cowan by phone and at her Slippery Rock Township home were unsuccessful.

There have been 185 bank failures since 2008, according to federal regulators. In comparison, credit unions have proved to be stable operations.

Just 15 were liquidated in 2009 in addition to one this year. Of those, 13 had their assets purchased by other credit unions.

The New Castle Area School District said the number of employees making deposits to the Lawrence County School Employees’ Credit Union dropped from 115 to 79.