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Monday, March 16, 2015

Oops, They Did It Again

Out of Their Control

2015 may prove to be the most embarrassing year experienced by Priority One Credit Union in South Pasadena, California since January 1, 2007, the date when Charles R. Wiggington, Sr. was appointed President and CEO of the once successful Credit Union.

We've been away for a few weeks, though during our absence, one astute reader of this blog, posted the following comment::

Chief Jay Strongbow said...

John, Did you see the article on Priority One in the on-line edition of Credit Union Times today about the $1 million theft and accompanying lawsuit? Any more insight on it?

March 9, 2015 at 11:32 AM

The article the reader alludes to was written by David Morrison and appears in the March 7, 2015 edition of the CU Times. Mr. Morrison wrote that a former, long-time employee of Priority One Credit Union, embezzled more than $1 million from the Los Angeles branch. 

In March 2013, we reported that then AVP, Lynnette Fortson ("Pearl Lynnette Fortson") left the Credit Union abruptly, after more than forty (40) years of service. Her sudden departure surprised many employees, resulting in myriad of rumors alleging she resigned, she was terminated, and she was laid off Her departure also prompted complaints from many employees of the Los Angeles Postal Distribution Center ["LAPDC"], the facility where the Credit Union's Los Angeles branch is located. 

Within a few days following Ms. Fortson's departure, Vice President of Operations, Yvonne Boutte, revealed to some staff members in South Pasadena and at the Los Angeles branches, that Ms. Fortson had been terminated for stealing money. 

In January 2013 and prior to Ms. Fortson's termination, Mrs. Boutte told some of her staff at the South Pasadena branch that she would be temporarily relocating to the Los Angeles branch during which she would conduct an investigation in response to mounting Member complaints alleging abusive treatment by the staff in the Los Angeles branch. 

In February 2013, Mrs. Boutte revealed that Ms. Fortson left the Credit Union on a personal leave of absence because she allegedly did not wish to be present during Mrs. Boutte's investigation.

However, at the end of February, in-house auditor, Diane Huffman, arrived at the Los Angeles branch where she conducted a three day investigation of that office's records. At the time, the President and Board Chair, Diedra Harris-Brooks perpetrated a hoax to try and hide the fact an audit was being conducted. On the day Ms. Huffman arrived, Mrs. Boutte posted a notice on the Los Angeles branch's doors, informing Members and visitors that the Branch was closed due to a power outage. The Credit Union posted the same message on their Facebook and webpages. As usual, the lie perpetrated by the President and Board Chair, was exposed. Members began reporting that though the Branch was closed due to a power outage, the lights in the branch remained on and employees could be seen working at their desks. At the time, we contacted the LAPDC to inquire about the outage, but we were told there were no reported outages for any part of the vast postal complex which includes the Los Angeles Branch. 

The President and Board Chair's simplistic and juvenile lie was also proven to be a lie when Mrs. Boutte warned the staff at the Los Angeles Branch that they were prohibited from ever speaking to Ms. Fortson. 

In reading comments posted in response to our previous blog publication, that a few supporters of the President seem ignorant about the latest predicament the Credit Union finds itself embroiled in. What's more, the theft of $1 million is not the first internal theft to occur at the Los Angeles Branch. In late 2009 and early 2010,  Turner, Hwang, and Conrad AC conducted an audit and discovered that more than $60,000 had been embezzled by a former receptionist assigned to the Los Angeles branch. This latest incident serves to again bring into question the ability of the Credit Union and its deficient Board of Directors, to protect Credit Union and Member assets. All indicators suggest that Priority One's security protocols are either outdated, ineffective, or not being practiced by executive and non-executive personnel. 

Since Charles R. Wiggington, Sr. was appointed President on January 1, 2007, the Credit Union has often found itself immersed in embarrassing scandals. Not only have many of the President's actions proven detrimental to the Credit Union but his immense ineptitude and illegal activities have been well protected by the Board of Directors. Since 2007, the Board has done everything in its power to ensure evidence of the President's abuses and illegal acts is suppressed. To ensure the President escapes retribution, the Board Chair and President have used Priority One's monies as their own personal piggy bank, hiring attorneys who fabricated defenses impugning the character of former employees and one Member victimized by President Wiggington and the Credit Union's unethical Human Resources Department. The evidence proves that under Mrs. Harris-Brooks, the Board has failed to:
  • Set policies that ensure growth, development and the protection of Credit Union and Member Assets. 
  • Made certain the Credit Union maintains a sound financial condition.
  • Established and maintained channels of communication that inform Members about services and products the Credit Union offers that will enhance and improve a person’s financial well-being.
  • Ensured executive officers achieve goals and objectives
  • Provided truthful and undistorted information to Members during the Credit Union's annual meeting concerning the credit union's actual financial state.
And though internal thefts have been a problem plaguing the Los Angeles branch, they represent a betrayal of the confidence Members should have in the Credit Union's ability to protect their assets. Other illegal and unethical acts committed by the President include:
  • Ordering repossession of an automobile that was subject to collection proceedings, though the Member had signed a repayment plan which would have allowed him to retain his BMW and become current. The President who only buys BMW’s, ordered the vehicle repossessed. He transferred ownership to himself and documented fictitious documents to create the appearance the vehicle had been sold at auction. 
  • In 2008, President Wiggington was found to have committed sexual harassment yet the Board spent thousands of dollars squashing the evidence.
  • In 2009 through 2011, former COO, Beatrice Walker, made numerous personal purchases which she was reimbursed for including buying a $5000 laptop. She also had workman hired to install new carpeting at the South Pasadena branch, deliver and install left over carpeting at her home in the Santa Clarita Valley. 
  • From 2010 through 2013, the Credit Union was sued by four (4) former employees and one now former Member, all who alleged violations of Federal law committed by President Wiggington, by former COO, Beatrice Walker, and by Human Resources which is under management of Executive Vice President, Rodger Smock. The cases were settled by the Credit Union  in an effort to avoid what would have been nasty and embarrassing court trials.
Here is the article authored by David Morrison which appeared in CU Times on March 7, 2015:

$1M Vault Pinch Hits Priority One

By David Morrison, March 7, 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 Lynette 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: CUTimes Article

Turner, Warren, Hwang and Conrad's attorney concedes that Priority One didn't file a lawsuit against his client nor ever expressed dissatisfaction with any work performed by its auditors. Clearly, President Wiggington's defenders, have ignorantly declared that the Credit Union filed the lawsuit against Turner, Warren, Hwang and Conrad when it is CUMIS who filed the lawsuit. . 

Following the filing of CUMIS' complaint, Turner Warren Hwang and Conrad AC  responded and on December 5, 2014, filed a lawsuit against Priority One Credit Union. 

In their complaint, CUMIS accuses the auditing firm of failing to identify thefts occurring at the Los Angeles branch, during their 2009/2010 audit. We hope that CUMIS has sufficient evidence needed to prove their allegations. The audit of Los Angeles Branch's records specifically reviewed documentation handed to the auditors by AVP, Pearl Lynette Fortson. Did she provide all documentation including those records that might have proven her duplicity in embezzlement of Credit Union funds? There is also the matter about the President's responsibility to ensure all security protocols are in place and being practiced by all staff Members. And aren't the Board of Directors and the Supervisory Committee responsible for ensuring all policies are being adhered to by every employee of the Credit Union? Couple this with the fact that prior to the 2009/2010 audit, a former receptionist absconded with more than $60,000 suggesting that neither the President or the two governing bodies performed their due diligence. We believe CUMIS is placing its hope and focus on the alleged failure by the auditing firm to identify the theft of $1 million by the then AVP of the Los Angeles branch though ultimately and as CUMIS knows, the responsibility to police its own records is the Credit Union.

In 2010, the Board, the President and then COO, Beatrice Walker, agreed they would not report the former receptionist to authorities in an effort to avoid public disclosure of the theft. Of course, within weeks following our expose' of the theft, the Board was forced to contact police authorities and the former receptionist was indicted and eventually convicted though she only received probation for the theft she perpetrated. 

CUMIS has leveled accusations against Turner, Warren, Hwang and Conrad which means they have the burden of proving their assertions. Can CUMIS prove beyond a reasonable doubt that at the time of their 2009/2010 audit, Turner, Warren, Hwang and Conrad were presented with a real general ledger and real balance sheets that contained evidence the AVP had absconded with $1 million?  During that audit, Ms. Fortson provided auditors the documents they eventually reviewed. Does this at all seem like a conflict of interest? We also have to believe that if Ms. Fortson perpetrated a crime that she would have done everything in her power to cover up the evidence. We certainly hope CUMIS won't try to deter attention away from the President, the Board, and the Supervisory Committee and from the fact that it was Ms. Fortson who had complete control over vault cash, general ledgers and balance sheets belonging to the Los Angeles branch.

Another fact is that CUMIS is well aware of every lawsuit filed against the Credit Union by four former employees during the years of 2010 through 2013 and they are also aware that President Wiggington was found guilty of sexual harassment in 2008. Despite these well recorded incidents it was CUMIS who decided to maintain relations with the Credit Union. 

What's more, in 2010, an auditor from CUMIS discovered that the Credit Union had at times failed to close checking accounts belonging to Members who were granted HELOC's. In 2010, a couple withdrew the money for the HELOC after the date the account should have been closed and CUMIS, paid the claim filed by the Credit Union. At some point one has to ask why knowing what they do about President Wiggington and the Credit Union's abuses and negligible acts, would they continue a working relationship with what is probably the industry's biggest pariah? Here is the summary of the lawsuit filed by Turner Warren Hwang and Conrad AC

Case #EC063303
Plaintiff: Turner Warrne Hwang and Conrad Account VS Priority One CU
Filing Date: 12/05/14

Case Type: Other Contract (General Jurisdiction)
Status: Pending
Future Hearings

05/04/2015 at 08:30 am in department B at 300 East Olive, Burbank,  CA 91502
Conference-Case Management

Chapman, Gluckman and Dean- Attorney for the Plaintiff
John C. Steele- Attorney for the Defendant
Priority One Credit Union- Defendent
Turner, Warren, Hwang and Conrad- Plaintiff

Documents Filed (Filing dates listed in Descending Order)

02/02/215 Answer (to Complaint)
Filed by Attorney for Defendent

01/09/2015 Proof of Service (of Summons, Complaint, Civil Case Cover Sheet, Civil Case Cover Sheet Addendum and Statement of Location. Notice of Order to Show Cause Re: Failure to Complay with Trial Court Delay Reduction Act filed by Attorney for the Plaintiff

12/24/2014 Proof of Service of Summons and CO/Ptn
Filed by Attorney for Plaintiff

12/24/2014 Notice (of Related Case (BC541935)
Filed by Attorney for Plaintiff

12/05/2014 Notice- Case management Conference
Filed by Clerk

12/05/2014 Complaint filed- Summons issued

12/05/2014 Summons Filed

12/05/2014 OSC- Failure to File Proof of Service Filed by Clerk

During the month of December 2014, Ms. Fortson called former employees of the Credit Union and stated she hired an attorney who she explained, was conducting an investigation to acquire evidence that her reputation had been slandered by the Credit Union. Though we do believe her reputation was slandered by Vice President, Yvonne Boutte, who in March 2013 revealed the reasons why Ms. Fortson was termimated, we believe her obtainment of an attorney is to defend her against the police report filed by CUMIS which accuses Ms. Fortson of perpetrating fraud. 

On March 15, 2015, comments were posted in response to our previous past congratulating the President and Board for suing Turner, Warren, Hwang and Conrad. Unfortunately, the President's supporters are either ignorant of the fact or intentionally trying to distort what actually transpired. What we wonder is if the comments are being posted at the request of the President or based on disclosures made by the President. Is Charles R. Wiggington, Sr. telling people that Turner, Warren, Hwang, and Conrad are guilty of negligence for not having identified the thefts allegedly perpetrated by the former AVP during audits of the Los Angeles branch's records? If true, then he has slandered Turner, Warren, Hwang, and Conrad and may be placing Priority One in yet another legally precarious position. 

Inarguably, Priority One never had any intent of reporting the AVP to police authorities but they and Board Chair, Diedra Harris-Brooks, may not have thought that following their investigation of the incident, CUMIS would contact police authorities and file a lawsuit against the accounting/auditing firm. 

There is no doubt that this latest legal entanglement will force the Board to again dig deep into the Credit Union's coffers to pay for expensive attorneys and litigation. Since Charles R. Wiggington, Sr. became President, the Board has made it a habit of pillaging the Credit Union's monies to cover-up negligible and illegal acts that only occurred due to the Board's inability to fulfill its appointed responsibilities which includes ensuring the well-being of the Credit Union. This latest scandal to rock the Credit Union again reveals that this Board is unconcerned with the safety and well-being of Credit Union and Member assets. 

Lie with Dogs, Get Up with Fleas

We could probably devote several posts to the subject of Turner, Warren, Hwang, and Conrad's and CUMIS' decision to enter into and maintain relations with Priority One and its notorious President. Most ethically managed companies might avoid establishing any relationship with a company whose recent history is marred by abuses of authority, violations of state and federal laws, and saturated by acts of overt negligence.

We actually hope the auditing firm wins despite our belief they compromised ethics when choosing to do business with the Credit Union. For CUMIS to win their lawsuit requires they prove the auditing firm failed to identify the theft of $1 million during its 2009/2010 audit and possibly any audits of the Los Angeles branch's records that may have been conducted by the accouting firm in 2011 and 2012. We can't imagine how CUMIS intends to explain how during the 2009/2010 audit of the Los Angeles offices records discovered more than $60,000 embezzled by a former receptionist but missed evidence proving the theft of $1 million. 

CUMIS may also have to prove that at the time of their audit(s), Turner, Warrne, Hwang, and Conrad were provided genuine records by Ms. Fortson. As stated previously, it seems a conflict of interest that when thefts were being investigated, Ms. Fortson was present while auditors perused records. Furthermore, it was she who provided them the documentation they audited.What's more, how was the auditing firm able to find evidence $60,000 were stolen by a former receptionist but missed all together, evidence of a theft of $1 million allegedly perpetrated by Ms. Fortson? Something seems awry and we believe CUMIS needs to provide something substantial that doesn't leave the impression they are trying to aid the Credit Union to escape accountability for its failure to ensure security measures were in place and being performed on a daily basis. At the moment, it appears that CUMIS' lawsuit is using Turner, Warren, Hwang and Conrad as a scapegoat in their effort to recuperate the $980,000 paid against the claim filed by the Credit Union.

It is important to note that the Credit Union only became aware of thefts perpetrated at the Los Angeles branch, AFTER Members complained money was missing from their accounts. 

Finally, where is the Supervisory Committee? They are responsible for ensuring Credit Union and Member assets remain safe and protected. Since we began publishing in 2009, the committee comprised of Board Chair, Cornelia Simmons; Anna Smith the Secretary; Hazel-Brown-Harvey; Lorenzo Ford; and I.D. Williams has remained invisible though each year, attendees of the Annual Meeting are subjected to Cornelia Simmons' scripted and boring assurances that everything is running well at Priority One Credit Union and never alluding to the thefts plaguing the Los Angeles branch. Its about time the supervisors were ousted and replaced with people who actually understand the purpose of their role on the committee. . 

In the meantime, we can all be assured that the destructive dynamic which has left Member accounts vulnerable to theft, remains soundly in place at Priority One Credit Union.  

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