Defining What's Normal, Part 2 of 3

TURN ABOUT IS FAIR PLAY

When it comes to resolving it's internal problems, nothing is ever simple at Priority One Credit Union in South Pasadena, California. During the month of June 2015, the credit union's attorney, John C. Steele of the Law Offices of Les Zieve in Irvine, California, filed a "Notice of Motion and Motion to Consolidate" ["the Notice"] seeking consolidation of the lawsuits filed by Priority One's insurance carrier, CUMIS, and the lawsuit filed by its former external auditor, Turner, Warren, Hwang, and Conrad.   

The reasons for requesting consolidation is that the two lawsuits possess certain similarities including use of the same witnesses and documented evidence. 

Under leadership of President Charles R. Wiggington, Sr., the number of lawsuits filed against and by the credit union have skyrocketed since his appointment on January 1, 2007. Lawsuits accusing Priority One of violating state and federal laws started in October 2010 when the former Branch Manager of the no longer existent Burbank office, accused the credit union of age and race discrimination. Over the three years that followed filing of that lawsuit, three other employees filed lawsuits alleging they were subject to sexual harassment, same-sex sexual harassment, retaliation, race discrimination, defamation of character and creation of a hostile working environment. The lawsuits were all voluntarily settled by the credit union with each Plaintiff signing an agreement that contained a disclaimer which declared that each settlement payment should not be construed as an admittance of wrong doing. In actuality, a settlement payments is an admittance that evidence possessed by a Plaintiff could result in an adverse judgment to the credit union. Furthermore, issuing a settlement payment avoids a potentially costly and embarrassing court trial and creation of a public record of the accusations, testimonies and final judgment.

Despite the payment of settlements, in 2013, President Wiggington and Vice President of Operations, Yvonne Boutte, boasted that the amount of each settlement were paltry and inconsequential to the credit union revealing once again, that Priority One's horrendous leadership have absolutely no concept of the detrimental impact lawsuits have upon a business.  

In 2013, an officer of the Credit Union and more than likely, a member of the Credit Resolutions Department, posted comments about a Member and her then delinquent loan, throughout the Internet. The Member sued the Credit Union and within fix months, her complaint was voluntarily settled by Priority One. The settlement included:

• Writing off her remaining unpaid loan balance
• Removal of all adverse references from her credit union
• Issuance of a letter signed by President Wiggington admitting that someone disparaged the Member but denying he authorized the violation of the Privacy Act; and
• Paying the Member a settlement in the amount of almost $20,000 to avoid a costly and potentially embarrassing court trial.

To provide some understanding of the complexities involved in each of the current lawsuits, we are now providing summaries of all pre-trial meetings so far conducted. Remember, none of the lawsuits have actually proceeded to trial. It is also important to note that on June 4, 2015, Priority One's attorney filed a counter-complaint against the credit union's former external auditor, Turner, Warren, Hwang and Conrad.

CUMIS VS TWHC

Case Number BC541935

06/09/2015 Proof of Service

Filed by Attorney for Defendant/Respondent

06/09/2015 Order (GRANTING MOTION TO ADMIT ATTORNEY PRO HAC VICE )

Filed by Court

05/15/2015 Declaration of Diligence (Deposition Subpoena Served on Cynthia Villamin )

Filed by Attorney for Pltf/Petnr

05/15/2015 Motion in Limine (for an Order Excluding Any Expert Report by Defendants' Witness Michael J. Sacher, CPA; P's & A's; Declaration of Patrick J. Collins in Support thereof; [Proposed] Order thereon)

Filed by Attorney for Plaintiff/Petitioner

05/12/2015 Notice of Ruling

Filed by Attorney for Defendant/Respondent

05/04/2015 Statement-Case Management

Filed by Attorney for Plaintiff/Petitioner

05/01/2015 Receipt ( jury fees $150 )

Filed by Attorney for Defendant/Respondent

05/01/2015 Statement-Case Management

Filed by Attorney for Defendant/Respondent

04/29/2015 Statement-Case Management

Filed by Attorney for Defendant/Respondent

04/17/2015 Declaration of Diligence

Filed by Attorney for Plaintiff/Petitioner

04/14/2015 Notice of Change of Address

Filed by Attorney for Plaintiff/Petitioner

04/14/2015 Notice (OF STATUS CONFERENCE RE: RELATED CASES AND CONT CMC )

Filed by Attorney for Plaintiff/Petitioner

04/08/2015 Motion (TO ADMIT ATTORNEY PRO HAC VICE )

Filed by Attorney for Plaintiff/Petitioner

03/13/2015 Notice of Ruling

Filed by Attorney for Plaintiff/Petitioner

01/16/2015 Order (RE EX PARTE OF 01/16/15 )

Filed by Court

01/16/2015 Ex-Parte Application (DEFENDANT'S EX PARTE )

Filed by Attorney for Defendant/Respondent

01/08/2015 Notice-Related Cases

Filed by Attorney for Plaintiff/Petitioner

10/01/2014 Stipulation and Order

Filed by Court

08/18/2014 Notice of Association of Attorneys

Filed by Attorney for Plaintiff/Petitioner

08/18/2014 Notice of Ruling

Filed by Attorney for Plaintiff/Petitioner

07/18/2014 Notice of Motion (TO ADMIT ATTORNEYS PRO HAC VICE )

Filed by Attorney for Plaintiff/Petitioner

06/13/2014 Cross-complaint

Filed by Attorney for Cross-Complainant

06/13/2014 Summons Filed

Filed by Attorney for Cross-Complainant

05/30/2014 Statement-Case Management

Filed by Attorney for Defendant/Respondent

05/30/2014 Statement-Case Management

Filed by Attorney for Plaintiff/Petitioner

05/20/2014 Proof of Service

Filed by Attorney for Plaintiff/Petitioner

05/16/2014 Answer

Filed by Attorney for Defendant/Respondent

05/02/2014 Proof of Service

Filed by Attorney for Plaintiff/Petitioner

04/23/2014 Notice-Case Management Conference

Filed by Clerk

04/07/2014 Complaint

Filed by Attorney for Plaintiff/Petitioner

TWHC VS PRIORITY ONE CREDIT UNION

Case Number EC063303

07/01/2015 at 10:00 am in department 71 at 111 North Hill Street, Los Angeles, CA 90012

Motion for Leave

08/18/2015 at 10:00 am in department 71 at 111 North Hill Street, Los Angeles, CA 90012

Status Conference(& R/C BC541935)

08/24/2015 at 10:00 am in department 71 at 111 North Hill Street, Los Angeles, CA 90012

Status Conference(& R/C BC541935)

Documents Filed (Filing dates listed in descending order)

06/04/2015 Motion for Leave

Filed by Attorney for Defendant/Respondent

06/04/2015 Motion

Filed by Attorney for Defendant/Respondent

05/06/2015 at 10:00 am in Department 71, Suzanne G. Bruguera, Presiding

Status Conference (RE RELATED CASE AND CONT'D CMCFROM 04/06/15) - Completed

05/11/2015 at 10:30 am in Department 71, Suzanne G. Bruguera, Presiding

Telephonic Conference (& REL'D BC541935) - Completed

04/14/2015 Notice of Status Conference filed (RE RELATED CASES AND CONT CMC )

Filed by Attorney for Defendant/Respondent

04/06/2015 at 09:30 am in Department 71, Suzanne G. Bruguera, Presiding

Conference-Case Management - No Appearance

03/06/2015 at 03:30 pm in Department 71, Suzanne G. Bruguera, Presiding

Nunc Pro Tunc Order - Completed

03/16/2015 Notice of Ruling

Filed by Attorney for Defendant/Respondent

02/27/2015 Notice-Case Management Conference

Filed by Clerk

02/02/2015 Answer (TO COMPLAINT )

Filed by Attorney for Defendant

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 COMPLY WITH TRIAL COURT DELAY REDUCTION ACT...)

Filed by Attorney for Plaintiff

12/24/2014 Notice (OF RELATED CASE (BC541935 )

Filed by Attorney for Plaintiff

12/24/2014 Proof of Svc of Summons & Co./Ptn.

Filed by Attorney for Plaintiff

12/05/2014 Notice-Case Management Conference

Filed by Clerk

12/05/2014 OSC-Failure to File Proof of Serv

Filed by Clerk

12/05/2014 Complaint filed-Summons Issued

12/05/2014 Summons Filed

The lawsuits filed by (1) CUMIS against Turner, Warren, Hwang and (2) the lawsuit filed by Turner, Warren, Hwang and Conrad against Priority One Credit Union and (3) now, the lawsuit (cross-complaint) filed by Priority One Credit Union against Turner, Warren, Hwang and Conrad have absolutely nothing to do with proving who physically walked out of the Los Angeles branch during the years of 2010-2012 with $1 million in cash in their possession. This prompts us to wonder what has happened to CUMIS' initial complaint file against accused embezzler, Pearl Lynnette Fortson? 

Historically, Ms. Fortson like every executive of Priority One Credit Union, was a mediocre Branch Manager and later, an even more mediocre AVP. However, her limitations aside, she apparently was a mastermind of no small stature when she inconspicuously and almost invisibly, walked out of the Los Angeles branch with more than $1 million in cash.The fact that she did so without detection by any of the Credit Union's overpaid officers, the evidently comatose Supervisory Committee and the brain dead Board of Directors is amazing. 

CUMIS is exerting tremendous effort to build a case around Turner, Warren, Hwang and Conrad's alleged violation of established auditing standards which resulted in subpar reports provided to the Supervisory Committee who afterwards, compiled erroneous assessments of Priority One's actual financial performance and its internal security protocols. This is at least, what CUMIS hopes a jury will believe. 

Certainly CUMIS is desperate to recuperate the monies paid to Priority One against the Credit Union's $1 million claim yet doesn't it seem at all peculiar that CUMIS is placing blame on Turner, Warren, Hwang and Conrad who had absolutely nothing to do with the physical removal of more than $1 million in cash from the Los Angeles branch. 

Here is status of Ms. Fortson's case:

: 

CUMIS VS PEARL LYNNETTE FORTSON

Case Number BC542611

• In a declaration filed on December 11, 2014, CUMIS' attorney, David R. Bence, states that during an August 1, 2014 hearing, he informed the court that Ms. Fortson had filed for bankruptcy protection. At the time, the court scheduled a bankruptcy status meeting for October 30, 2014. 
• On October 3, 2014, Mr. Bence appeared in court and disclosed that his client, CUMIS, was preparing to file an Adversary Complaint. At the time, the Court set a bankruptcy conference for July 30, 2015, however, Mr. Bence later claimed that he never received a notice from the court advising him that the conference had been rescheduled to December 8, 2014.
• A status conference has now been scheduled to take place on August 5, 2015 at Superior Court in Los Angeles. 

Ms. Fortson's filing for bankruptcy protection is actually quite clever. If approved, she will not have to pay restitution for the money she allegedly embezzled. 

The elephant in the room for Priority One which the Board of Directors, the Supervisory Committee and President Wiggington are not referring to, is the vast amounts being spent on attorneys and the adverse impact the costs to litigate are having upon the credit union's financial resources. 

During the years of 2010 through 2013 Priority One's annual spending on legal skyrocketed from approximately $20,000 to $22,000 spent in the years while William E. Harris served as President and CEO, to an unprecedented more than $120,000 (per year). 

Frustrated with our periodic publication of the Credit Union's legal expenditures, in 2014, President Wiggington ordered removal of the credit union's monthly and annual legal expenses from its Income Statement/Balance Sheet. President Wiggington's efforts to hide the amount spent on "legal" is hardly necessary to gauge its effect upon the Credit Union's financial performance. Since 2008, President Wiggington has exacted tremendous effort to ensure Net Capital remains well above 6%. This meant closing branches, implementing a company-wide wage freeze that affected everyone but the executive sector. He also reduced spending on marketing, advertising and business development and ceased almost all together, the credit union's involvement in community and chamber sponsored events. The end result has been a continual struggle to try and garner new business and members. The credit union's efforts have been continually been undermined by growing disinterest by Members and potential Members in the financial products offered by the credit union coupled by a large number of account closures. The failure to generate consistent high profits have also impacted the Credit Union's ability to pay its bills. As Bankrate.com has reported each year since 2011, Priority One's suffers from "above normal overhead."

It is clear that Priority One's high legal expenses which increased to a total of more than $500,000 during the years of 2010-2013, are heavily taxing the credit union. The added expenditures pay for attorneys who work frantically to fabricate defenses that are intended to help Priority One escape retribution for the failures, abuses and negligible behaviors committed by the President, the Board of Directors, and the Supervisory Committee.

But First......

Due to the over 40-pages of legal documents filed by the Credit Union on June 4, 2015, we will have to continue our reporting about the lawsuits over the next 1 or two publications. However, at this time we'd like to report on other events occurring at Priority One that are not related to the lawsuits. 

RAISES FOR SOME EMPLOYEES

The Credit Union announced during its April 2015 all staff meeting that following a more than four (4) year wage freeze, there would be a PARTIAL lifting of the company's four-year wage freeze. 

To be accurate, the four-year freeze never affected every single employee of the credit union. The wage freeze was officially introduced in late 2010 by President Wiggington and then COO, Beatrice Walker. The reason why the freeze was implemented is that Priority One was not obtaining the level of new business needed to offset its expenditures. At the time, net capital had dropped to 6.8% and the DFI informed the President that he needed to raise net capital, suggesting he streamline operations including, close branches that were not operating at optimum. 

Despite implementation of the freeze, at the end of 2010, the President received a bonus from the Board of Directors and in the years since 2010, has received annual bonuses and raises. His failures, illegal acts and immersion in scandals were evidently inconsequential to the Board of Directors and the loss of more than $20 million in net income and the filing of numerous lawsuits were of absolutely no consequence to his continue stay as Priority One's worst President and CEO in its more than 87 year history.

The partial lifting of the freeze should not be construed as an indicator that business has improved. The credit union remains in a financial slump and as we saw in 2014 and 2015, he continues to hide the organization's annual reports. 

In 2010, we witnessed a similar incident. In February 2010, President Wiggington and then COO, Beatrice Walker, spread rumors that Priority One had generated profits during the month of January. As evidence to profit, the Income Statement/Balance Sheet for the month of January 2010 showed profits in excess of $100,000. The claims to profit seemed suspicious because the credit union ended 2009 more than $5 million in the negative. By March 2010, a representative of the Accounting Department revealed that the President and Ms. Walker transferred monies from one of the credit union's general ledgers and reported the "borrowed" money as profits where no profit had occurred. The year ended with income more than $500,000 in the negative.  

FINALLY, THE DEPARTURE OF JOSEPH GARCIA

Joseph Garcia, the man who was once known as former COO, Bea Walker's number one confidant and who over a two-year period was promoted from Call Center Supervisor to Consumer and Real Estate Loan Department Manager, Credit Manager and later demoted to Consumer Loan Manager and demoted again to Assistant Consumer Loan Manager and promoted to AVP of Sales and Business Development and finally, demoted to Business Development Representative and who failed at every position he held, has finally department the credit union on his own volition. He won't be missed.

In 2010, Mr. Garcia provided false testimonies to the President which facilitated the expulsion of several employees the President, then COO, Beatrice Walker, and Executive Vice President, Rodger Smock, labeled enemies of their regime. 

By early 2011, Mr. Garcia's relationship with his former benefactor, Beatrice Walker, had deteriorated and having discovered that she had targeted him for termination, the cowardly Mr. Garcia fled the credit union on a medical leave alleging he was suffering from stress. 
While on medical leave, Ms. Walker was terminated and Mr. Garcia returned to work shortly thereafter.

He spent the next two months,  wooing the President and by November 2011, the obtuse Mr. Wiggington promoted Mr. Garcia to Vice President of Sales and Business Development. Mr. Garcia promised he would "force" employees to perform or they would suffer termination. With then Chief Loan Officer, Cindy Garvin, the two developed quotas for every employee and on February 2, 2012, launched their new program. Over the next eight months, Mr. Garcia and Ms. Garvin orchestrated the termination of many new and long-time employees for failing to attain their quotas. By October 2012, it was obvious that Mr. Garcia's strategies had all failed. Frustrated, Ms. Garvin threatened to terminate him and he again, fled the credit union on yet another medical leave of absence again alleging work induced stress. In December 2012, Ms. Garvin was terminated and Mr. Garcia returned to work in January though upon his return, he was advised that he was being demoted to the post of Priority One's one and only Business Development Representative. At the time, he was assigned a monthly quota of $150,000. 

Over the next two years Mr. Garcia never attained his quota. His highest number of loans funded for a single month approximated $30,000. Despite his gross failures, the President exempted him from the credit union's policy which explicitly stated employees who failed to attain their quotas during a consecutive two-month period would be terminated. 

Over the next two years, Mr. Garcia became another useless fixture of the credit union, contributing absolutely nothing to the betterment of the company. 

In the weeks preceding his May departure, Mr. Garcia was sent to work at the Van Nuys branch in the position of interim Branch manager. While there, he complained that his employer was forcing him to drive each day from his residence in Montclair to Van Nuys and that he had grown weary of being taken advantage of. 

Before being unceremoniously terminated in July 2011, then COO, Beatrice Walker, used to boast that if you wanted to force an employee to resign, all you had to do was transfer the, to a branch that was located furthest from their home. Mr. Garcia, the man who was a polarizing presence in the credit union and who was responsible for the termination of dozens of employees in 2012, and who failed in every capacity he served in, fell victim to Bea Walker's infamous ploy, finally driven out by President Wiggington.

A NEW CFO? NOT EXACTLY

What do you get when you can no longer afford to hire a CFO? You hire a Controller. Of course a CFO is not synonymous with being a Controller though President Wiggington is hoping to force a change in what defines the responsibilities of a Controller.  

In 2014, the President revealed that he and Board Chair, Diedra Harris-Brooks, and Executive Vice President, Rodger Smock, agreed that when a new CFO was hired to replace former CFO, Saeid Raad, that no announcement would be posted by the credit union. Their reasoning was that they didn't want the information to find its way to the Internet. 

In 2014, the credit union hired a Controller to fill the position vacated by Saeid Raad. However, the position to hire a Controller versus a CFO, was economics. The fact is, Priority One could no longer afford to pay a salary of $140,000 or more, to a new CFO. So they opted for a more economical alternative. The Controller is Simona Hollins who prior to her arrival at Priority One, worked for SH Account Services and obtained an MBA in Accounting from the University of Phoenix. 

This is not the first time Priority One has had a Controller. After the departure of CFO, Manny Gaitmaitan, at the end of 2009, the President convinced the Board of Directors that he could promote then Accounting Supervisor, Jennifer Kelly, to the post of Controller and that she would be able to perform most of the responsibilities once performed by Mr. Gaitmaitan. Ms. Kelly proved that a Controller is not a CFO and her stint as Controller was short-lived. 

Unlike her predecessor, Mr. Raad, who was introduced to the Credit Union through his then friend, COO, Beatrice Walker, Ms. Hollins does not appear to have a business association with either the President or members of his executive sector. 

Unlike Mr. Raad who was introduced to the credit union by his former friend and associate, Beatrice Walker, Ms. Hollins does not appear to have been hired as a result of cronyism. Hopefully, she won't compromise ethics and like Mr. Raad, choose to manipulate the credit union's financial reporting practices.  

THE WILD WEST

Due to the amount of documentation filed by CUMIS, Turner, Warren, Hwang and Conrad and more recently, by Priority One Credit Union's attorney, we will only provide a small portion of the documents proving the reasons why the various Plaintiffs have filed complaints against one another. 

On June 4,2015, John C. Steele, attorney for the credit union filed the notice seeking consolidation accompanied by a counter-complaint filed by his client and alleging breaches of contract by Turner, Warren, Hwang and Conrad during each year (2008-2013) when the outside auditor provided reports based on audits that were conducted out-of-compliance to established and mandated auditing standards. Mr. Steels begins by presenting the facts underlying the lawsuits brought be each party.

Memorandum Points and Authorities

II. Statement of Facts

II. Statement of facts.

Priority One entered into a business relationship with Turner, Warren, Hwang and Conrad on March 31, 2008 and which continued until March 31, 2013. In February 2013, an audit of the Los Angeles branch's records revealed that more than $1 million in cash had been embezzled by Pearl Lynnette Fortson who CUMIS identifies as the Branch Manager of that office. The thefts occurred over a two-year period, 2010-2012, and began either in "early" or "late" 2010 and continued through 2012. In their lawsuit, CUMIS makes the following statements:

• Ms. Fortson embezzled the money by herself or with accomplices.

• The thefts began either in “early” or “late” 2010 and continued through 2012.

• In February 2013, on the date she was terminated, Ms. Fortson served in the capacity of Branch Manager of the Los Angeles office.

As shown below, some of the statements contained in CUMIS' lawsuit are inaccurate and tinged with uncertainty:

• Did Ms. Fortson steal more than $1 million in cash during the years of 2010 through 2012 by herself and without assistance or was she aided by an accomplice(s)? 
• Why couldn't CUMIS' experts obtain a more precise date when the thefts occur. Did these begin in "early" 2010 or "late" 2010?
• CUMIS identifies Ms. Fortson as the Branch Manager of the Los Angeles branch on the date she was terminated but Ms. Fortson was actually an AVP and had not been a Branch Manager since 2007.

Discrepancies with information seem to be a chronic problem with anything related to Priority One. At times, the discrepancies are intentional, such as when President Wiggington chooses to manipulate reporting. In regards to the Notice filed on April 4, 2015, CUMIS states it reviewed the evidence provided by Priority One Credit Union regarding the theft of more than $1 million from the Los Angeles branch's vault. CUMIS' review concluded that Priority One's "employee dishonesty claim" possessed sufficient merit justifying payment of the claim. CUMIS paid the $1,005,376.00 claim minus the $25,000 deductible for a total of $980,055.10.

Following payment of the claim, CUMIS next entered into a settlement agreement with Priority One which allowed CUMIS to seek recovery of the monies paid against the credit union's claim. Legal ease aside, this should not be construed to mean that CUMIS filed a lawsuit on behalf of the credit union but that they are trying to recuperate every penny paid against the claim in addition to any other awards the court may deem appropriate. 

Based on the information contained in the Notice, its now clear that on April 24, 2014, the date CUMIS filed its lawsuit against Turner, Warren, Hwang and Conrad, they had not gathered the evidence needed to prove their allegations against the external auditor. The inaccuracies and uncertainties we've described suggest that CUMIS filed their lawsuit to ensure filing occurred within the statute of limitations allotted under law. By doing so, CUMIS could amend their complaint at a later date. What's more, the Notice which was filed on June 4, 2015, slightly more than one year after CUMIS filed its lawsuit, reveals that one of CUMIS' "experts" founded enough additional evidence of wrong doing allegedly perpetrated by Turner, Warren, Hwang and Conrad allowing Priority One to file a counter-complaint against their former external auditor. 

Though there is nothing illegal about CUMIS' actions, the Notice suggests that the insurance carrier is quite desperate to recuperate the monies paid against Priority One's claim. Their desperation is sufficient that they were able, after one year, to provide Priority One Credit Union information that allowed the credit union to file a counter-complaint. If we didn't know better, we might think that CUMIS is trying to bombard Turner, Warren, Hwang and Conrad with as many complaints and allegations of wrong doing to sway a jury to issue a judgment in their favor. 

CUMIS' CASE

Specifically, CUMIS accuses Turner, Warren, Hwang and Conrad of:

1. Failing to perform annual financial statement audits of the credit union "in compliance with professional standards governing:

• CPA auditors
• Federal regulations governing audits of credit unions
• Violating the terms of its agreements with Priority One for each year from 2008 through 2013

TURNER, WARREN, HWANG

AND CONRAD'S CASE

Priority One's attorney, John C. Steele, takes a moment to over emphasize that on "December 5, 2014- eight months after CUMIS filed its Complaint- TWHC filed a lawsuit in Los Angeles Superior Court (Case No. ECO63303), seeking a money judgment against Priority One for Priority One's failure to pay $68,299.79 in alleged monies owned to TWHC for the post-embezzlement investigation and preparation of a report."  Mr. Steele's caddy tone is not lost on us. 

He continues, stating that Turner, Warren, Hwang and Conrad seeks payment of $68,299.79 which the credit union failed to pay for services rendered. Doesn't it serve as a poor example when a credit union- a financial entity, that claims to be a "financial fitness center", refuses to pay its debts?

• According to Mr. Steele, Turner, Warren, Hwang and Conrad's lawsuit accuses Priority One of breaching the agreement entered into with Turner, Warren, Hwang and Conrad.

• Furthermore, Turner, Warren, Hwang and Conrad seek quantum meruit which simply means they seek "a reasonable sum of money" to pay for services rendered and work completed at the request of the Credit Union.

• Lastly, Turner, Warren, Hwang and Conrad ask the court for any amount due on open book account. 

Priority One 

Credit Union's Cross-Complaint

The disclosures made by Priority One's attorney, seems to indicates that since the thefts were discovered in February 2013, the credit union has remained in a stupor completely oblivious to the alleged failures committed by Turner, Warren, Hwang and Conrad and only realized in April 2015 that the reports provided to them in 2008, 2009, 2010, 2011, 2012 and 2013 were immersed in deficiencies. Clearly Priority One remains lost in a fog and like their inability to protect credit union and Member assets, it seems that they are quite oblivious to the validity of the records they utilize in forecasting the Credit Union's future performance or in assessing the effectiveness of its security protocols. 

FACTS

CUMIS has accused Turner, Warren, Hwang, and Conrad of negligible auditing practices. 
CUMIS alleges that if it weren't for these negligible practices, Turner, Warren, Hwang and Conrad would have noticed the thefts allegedly perpetrated by former AVP, Lynnette Fortson, which would have brought and end to the thefts.

Though the subject of auditing standards is important to ensure reports provided to the Credit Union are accurate for the purpose of developing projections and assessments, the FACT remains, Turner, Warren, Hwang and Conrad had absolutely no involvement in the physical removal of cash from the Los Angeles branch. 

According to the cross-complaint filed earlier this month by Priority One Credit Union, shoddily compiled reports produced by Turner, Warren, Hwang and Conrad were provided to the Credit Unions for the years 2008 through 2013. As a result, the Supervisory Committee created erroneous assessments based on the information provided by the external auditor. 

• So why didn't Priority One's internal security protocols ever identify a single theft allegedly perpetrated by the former AVP?
• Why didn't the Accounting Department which oversees cash sent to and received from all branches never identify a single discrepancy?
• Why didn't the Credit Union's Vice President of Compliance ensure that all branches were carrying out banking procedures pursuant to state and federal mandates and credit union policy? 
• Why didn't the Supervisory Committee perform its due diligence and personally conduct its own audits of branch cash? Is it customary for the Supervisory Committee to rely solely on the reports provided by external auditors or do they take the initiative to verify the accuracy of the information they're provided? 
• How did the AVP transport more than $1 million in cash from the Los Angeles vault without ever being observed by branch personnel? 
• What exactly does President Wiggington do to ensure security protocols are being performed by branch staffs? 
• How does Priority One's Vice President of Operations ensure that security measures are maintained and when necessary, amended? 

CUMIS' case is hardly cut and dry. In Aprill 2015, it's "expert", Stuart Harden, declared that Priority One's $1 million claim ("employee dishonesty claim") possessed sufficient merit for issuance of payment. He also provided the information the credit union used to file its counter-complaint earlier this month. However, CUMIS has historically paid other claims which point to negligence on the part of the credit union to ensure credit union and Member assets are well protected. Two other incidents include:

2009: An audit performed by Turner, Warren, Hwang and Conrad revealed that more than $60,000 were stolen by a former receptionist of the Los Angeles branch.

2010: A married couple, knowingly withdrew more than $100,000 from their HELOC checking account even though the term of the HELOC had expired. When asked to repay the monies, the couple refused. CUMIS' investigator interviewed current  and former employees of the Real Estate Loan Department who all confirmed the Credit Union was at times negligent about closing HELOCs. Despite the admittance of negligence, CUMIS paid the claim.

With regards to the latest claim filed by the Credit Union, CUMIS paid $980,055.10 against the Credit Union's claim of $1,005,376.00. CUMIS' decision to pay the credit union's claims is enigmatic since the question of the effectiveness of Priority One's security protocols should be scrutinized and further investigated. 

The credit union's refusal to pay the money owed Turner, Warren, Hwang and Conrad for services rendered following discovery in February 2013, that former AVP, Pearl Lynnette Fortson, embezzled more than $1 million, would not be the first time the organization drags its perennial feet to pay it debts. In 2010, then CFO, Saeid Raad, instructed the Accounting Department to withhold issuing payment on all invoices for at least 4 weeks after they were received by the Credit Union. He also ordered that employee reimbursements be paid out once per month which created a financial hardship to many of the Credit Union's low paid staff. His reason for withholding payments was because Priority One Credit Union did not have sufficient money budgeted to pay its expenses. Despite strained finances, President Wiggington would continue to insist over the next four years that business was great and the Credit Union., experiencing a financial resurgence. His statements were utterly untrue. 

And though Priority One is using the allegations against Turner, Warren, Hwang and Conrad to refuse issuing payment to its former external auditor, we believe that the refusal to pay is related to the Credit Union's strained finances and its continually looming overhead which does not abate because of Priority One's floundering business development efforts. 

There was a time, when the Supervisory Committee used to frequently visit each of Priority One's branch's and physically counted money in the vaults for the express purpose of ensuring cash balanced with the amounts of cash recorded in vault ledgers. Since Charles R. Wiggington, Sr. was appointed President and since both Cornelia Simmons became the committee's Chairperson, the practice that ensured safety, has been discarded. 

What's more, under Ms. Simmons, the committee does not meet on a monthly basis as it did when William E. Harris Was President. We believe the committee's minutes should be subpoenaed to prove how often they meet, what topics are discussed during their meetings, and which of the credit union's security measures have been reviewed and which which have been updated and amended. 

Though we intend to continue our dissection of the more than 40 page Notice submitted by Priority One's attorney in our next publication, we'd like to briefly  describe Turner, Warren, Hwang and Conrad's responses to each of the accusations leveled by CUMIS in their complaint filed with the Superior Court of California. Turner, Warren, Hwang, and Conrad provided a total of twenty-six Affirmative Defenses in their reply. Not surprisingly, the external auditor denies every one of CUMIS' ' accusations.

DEFENSE SUMMARY

Turner, Warren, Hwang and Conrad declares that in their lawsuit, CUMIS fails to provide evidence proving the external auditor committed professional negligence and that they breached the agreements entered into with Priority One Credit Union. What's more, they describe CUMIS' allegations as “uncertain, vague, and ambiguous” and add that as subrogee of the credit union, CUMIS does not possess the “legal capacity” in the state of California, to file a lawsuit against their firm. CUMIS is also accused of delaying filing of their lawsuit and in doing so, caused detriment to the auditing firm.

Turner, Warren, Hwang and Conrad further assert that Priority One Credit Union’s conduct created the opportunity which enabled the theft of more than $1 million from the Los Angeles branch and accuses the credit union of “Unclean hands”, a legal term which brings into question the ethical conduct of the infamous and scandal ridden credit union, its managing officers, and two governing bodies, i.e., the Board of Directors and Supervisory Committee.

Additionally, Turner, Warren, Hwang and Conrad states that the theft of more than $1 million was the result of acts committed by unnamed "others" and not their firm. So who are these "others" who allegedly committed acts including dispensing advice which created the opportunity for the theft of more than $1 million? 

The persons, departments or governing bodies which may include:

• President Wiggington
• Former CFO, Saeid Raad
• Three COO's: Beatrice Walker (2010-2011); Cindy Garvin (2011-2012); and Yvonne Boutte (2012-Present)
• Vice President of Compliance, Patricia Loiacano
• Board Chair, Diedra Harris-Brooks, and the Board of Directors
• Supervisory Committee Chair, Cornelia Simmons, and the Supervisory Committee
• The Accounting Department
• The credit union's internal auditor
• Any other external consultants and/or auditors

DID SOMEONE SAY, 
"PAST NEGLIGENCE"?

We recently came across the following 2007 article which we were previously unaware of. The article reminds us of the many security problems that have plagued Priority One since Charles R. Wiggington, Sr was appointed President. The lawsuits currently in litigation are the culmination of the President's inability to review the credit union's internal controls and introduce changes to resolve deficiencies found in Priority One's policies and procedures. 

Source: http://cuinnovators.com/blog/topics/member-service/

CONCLUSION

The Yellow M and M

Nowadays, Priority One' is best defined by its legal problems. The lawsuits filed each and every year since 2010 have exposed the unethical and abusive behaviors of President Charles R. Wiggington, Sr. and what seems to be his disdain for laws, policies and structure created to protect the credit union's assets. This same contempt towards rules is echoed by the Board of Directors and Supervisory Committee who have spent hundreds of thousands of dollars since 2007, ensuring President Wiggington remains in power. 

The counter-complaint filed on June 4, 2015, by the credit union can reasonably be viewed as yet another attempt by Priority One's leadership to escape accountability for their failures to ensure security protocols were being practiced and to find a scapegoat who will be held culpable for the $1 million in cash from the Los Angeles branch. 

With tremendous assistance by its insurance carrier, CUMIS, Priority One is now targeting its former external auditor, Turner, Warren, Hwang and Conrad and holding them responsible for the theft of more than $1 million in cash despite the fact CUMIS concluded that the credit union's security protocols were being maintained at the time the thefts occurred. So how did the credit union's allegedly well designed and effective security measures fail to identify or thwart the thefts that transpired during the years of 2010-2012? 

• Not only did the credit union's security protocols fail to deter the thefts of cash from the vault but in 2009, these same protocols failed to detect numerous internal thefts totaling more than $60,000 and perpetrated by a receptionist of the Los Angeles branch.

• And once again, these same protocols failed to stop a married couple of withdrawing more than $100,000 from a HELOC checking account whose term had expired. 

The big question remains as to how a single employee, with or without assistance by an accomplice(s), could physically remove more than $1 million in cash from the Los Angeles branch's vault without detection by the Supervisory Committee, the Board of Directors, three COO's, the Vice President of Compliance, and President Wiggington? 

The idea that several thefts occurred without detection brings into scrutiny the effectiveness of Priority One's policies and procedures designed to allegedly protect credit union and Member assets. We'd certainly like anyone from CUMIS to explain how they determined that Priority One's security implements are functioning at optimum.

As we've reported over the past six years, Priority One's executive sector and its Directors and Supervisors are gross incompetents, ignorant about the credit union's internal procedures that they allegedly are qualified to oversee. We hope Turner, Warren, Hwang, and Conrad's attorney will ask those important questions that will prove the competency or incompetency of the members of the credit union's two governing bodies.

When Charles R. Wiggington, Sr. was first appointed President, he was given a wonderful opportunity to lead the then growing credit union in a manner that befits a President of a Credit Union. Instead the inept officer chose to demonstrate his contempt towards laws and policies, ignoring what was beneficial to the Credit Union and seeking anything and everything needed to placate his bloated ego. Instead, the obstreperous and childish President chose to don all the dignity of the Yellow M and M and becoming the physical personification of everything that is counter-productive and or that is good for any business. 

Defining What's Normal, Part 1 of 3

Nowadays at Priority One Credit Union, headquartered in South Pasadena, California, "business as normal" has been displaced by fending off lawsuits. Its important to note that this dynamic did not exist at anytime during the 81 years preceding January 1, 2007, the date Charles R. Wiggington, Sr.  began serving as President and CEO of what was then a successful and growing Credit Union. 

Three lawsuits Priority One is currently litigating differ dramatically from those filed and voluntarily settled by the Credit Union during the years of 2010 through 2013. Those cases filed by four former employees and one Member, alleged violations of the Privacy Act, sexual harassment, same-sex sexual harassment, age discrimination, race discrimination, retaliation, and creation of a hostile work environment. The Credit Union paid out monies to avoid costly and potentially embarrassing court trials that would have produced documented records of abuses committed by the Credit Union's highest officers.

Two of the current batch of lawsuits, all filed in 2014, accuse the Credit Union and its President of various contractual related breaches while a third, filed by CUMIS, the Credit Union's insurance carrier, accuses the Credit Union's external auditors, Turner, Warren, Hwang, and Conrad of acting negligibly and failing to perform audits in compliance to established auditing standards. CUMIS also asserts that Turner, Warren, Hwang, and Conrad provided the Supervisory Committee erroneous information which in turn, compromised the integrity of the committee's annual performance assessments. CUMIS insists that the failures perpetrated by Turner, Warren, Hwang, and Conrad included not identifying thefts, perpetrated by Pearl Lynnette Fortson, a former AVP assigned to the Los Angeles branch, resulting in the theft of more than $1 million in cash from that branch's vault. 

As might be expected, CUMIS' allegations circumvent all reference to the Credit Union's and more specifically, the Supervisory Committee's responsibility to safeguard Credit Union and Member assets. Superficially, CUMIS' accusations seem absurd, eliciting questions about the actual theft and why so much responsibility is being placed on Turner, Warren, Hwang, and Conrad. Some of our questions are:  

• How could Turner, Warren, Hwang, and Conrad be held accountable for the physical removal of $1 million in cash from the Los Angeles Branch's safe when the Credit Union's Accounting Department, the Chief Operations Officer, and the Supervisory Committee are responsible for all records documenting money sent to and received from the Credit Union's branches. ?

• Why is CUMIS holding Turner, Warren, Hwang and Conrad responsible for thefts which occurred prior to their audit of the Los Angeles branch's ledgers? 

• Turner, Warren, Hwang an Conrad were hired by the Credit Union to perform audits. The Supervisory Committee and President, delegated instructions to the firm as what records were to be audited. Did the instructions they provided include a request to audit vault cash and general ledgers located at the Los Angeles branch? 

In a few weeks, the Credit Union will serve as a witness in CUMIS' lawsuit. The Credit Union will also be a defendant in a lawsuit filed Turner, Warren, Hwang, and Conrad and in another lawsuit filed by Auto Alliance, one of Priority One's contracted automobile brokers. . Because the President is named a defendant, he will finally have to appear in court and provide testimony concerning the Credit Union's internal controls and answer questions which will almost certainly scrutinize his abilities as President and CEO and possibly even touch upon his ethics. However, we wouldn't be surprised if he stages excuses to try and avoid or prolong, having to, participate in litigation. In the past the wily but cowardly President took refuge behind Board Chair, Diedra Harris-Brooks, who freely approved spending Credit Union monies to hire overpaid and unscrupulous attorneys and useless consultants to create bogus defenses concoct fictitious facades that tried in earnest to depict the President as a victim, incapable of the atrocities described in lawsuits.  

A TREK DOWN MEMORY LANE

. 
In 2013, a lawsuit was filed by a former Branch Manager, which cited egregious acts committed by and under President Wiggington, former COO, Beatrice Walker, and the entire Human Resources Department. President Wiggington was named a defendant but his attorney at the time, Paul F. Schimley, of Richardson, Harmon and Ober contacted the plaintiff's attorney and told her that if she didn't remove President Wiggington's name as a defendant in the lawsuit, he would have to file a motion with the court informing them that the President was suffering from cancer and undergoing medical treatments that he said would force postponement of the lawsuit for months and possibly years. . 

CUMIS VS TWHC

We;'re intrigued by CUMIS' lawsuit. Though Turner, Warren, Hwang, and Conrad did not perpetrate the actual theft of $1 million in cash from the Los Angeles branch's safe, it is their competency, expertise and reputation will will be dissected in court and which ultimately is a threat to their reputation. 

CUMIS' investigation concluded that Turner, Warren, Hwang, and Conrad are responsible for failing to detect any of the individual thefts during audits conducted in 2010, 2011, and 2012. Due to their gross oversight, eventually the thefts would amount to more than $1 million in cash. In their lawsuit, CUMIS alleges malpractice, a type of violation most often associated with lawsuits filed against attorneys and physicians. Oddly, CUMIS fails to cite an exact date when the thefts started, merely stating that they began in "early" or "late" 2010 and continued through the end of 2012. Why couldn't they provide a more specific date when the thefts occurred? Shouldn't they have merely stated that "the thefts began sometime in 2010?" 

Who is Turner, Warren,Hwang and Conrad? 

We visited Turner, Warren, Hwang and Conrad's webpage and discovered that in 2013, a peer review was performed by Caldwell, Becker, Dervin, Petrick and Company, LLP. and In a letter dated June 30, 2013, and written to shareholders, Caldwell Becker, Dervin, Petrick and Company concluded: 

"In our opinion, the system of quality control for accounting and auditing practice.... for the year ending June 30, 2013, has been suitably designed and completed to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects" and concluding, Turner Warren Hwang an Conrad ACE has received a peer review rating of pass."

Please note that the letter is dated only four months after the theft of $1 million was discovered by the Credit Union. Turner, Warren, Hwang and Conrad's website also contains the following overview of services they offer clients: 

TWHC's financial institutions practice provides a complete suite of services to credit unions of all sizes. Our credit union clients range from over $10 million to over $10 billion in assets. Our staff knows credit unions well. While the national firms we compete with call themselves specialists and the partner may have five or six credit union clients, our partners have in excess of 25 to 30 credit union clients each. 

We have a strong foundation built on our credit union practice. Our partners have worked for or with credit unions for over 20 years. We did not stumble onto credit unions or use them as filler time. We are dedicated to credit unions and have been from he beginning which is why we are ranked among the top five services providers to credit unions in the U.S. and are number one collectively in the states west of Arizona. 

:Source: https://www.twhc.com/about-twhc/peer-review/

Due to the length of CUMIS' lawsuit, we have decided to publish excerpts of only those allegations and statements we deem most important.  

As "subrogee", CUMIS has assumed the legal right to try and collect the monies paid out against the claim filed by the Credit Union. 

Former AVP, Pearl Lynnett Fortson, allegedly embezzled "at least $1,000,000" in cash, to wit, the amount was more than $1 million. She accomplished the thefts by allegedly "falsifying 'Daily Recaps", but how could the AVP, with or without accomplices, embezzle more than $1 million without detection by the Credit Union? Why did Priority One's internal controls designed to protect Credit Union assets fail to detect the thefts?

During the years of 2010 through 2012, Ms. Fortson's direct supervisors were COO, Beatrice Walker and later, CLO, Cindy Garvin, and finally, current Vice President of Operations, Yvonne Boutte. Over an approximate twenty-four period, why didn't any of the three overpaid and evidently, unqualified executives ever notice any of the several incidents during which money was embezzled? 

Turner, Warren, Hwang and Conrad's attorney may have told a reporter of the CU Times that Priority One never "expressed" disappointment with the services and decisions made by his client but the Credit Union's Supervisory Committee and CUMIS found sufficient evidence to conclude that Turner, Warren, Hwang and Conrad violated laws and provided fraudulent data that in turn caused the Supervisory Committee to derive erroneous conclusions about the Credit Union's actual performance. Since the Supervisory Committee is a governing body of Priority One Credit Union and because CUMIS' is the subrogee of the Credit Union, it appears Priority One was indeed, extremely disappointed with Turner, Warren, Hwang and Conrad's "actions." 

 

Under #19, CUMIS states that Priority One's Supervisory Committee is appointed by the Credit Union's Board of Directors and "tasked with the responsibility of obtaining an audit of the Credit Union's financials using an independent external auditor. But is the report provided from an "independent audit" the only source used by the Supervisory Committee to assess the Credit Union's performance and to gauge its ability to protect Member and Credit Union assets. 

Under #29, above, CUMIS states that during the years of 2011-2012, the Supervisory Committee was the recipient of Turner, Warren, Hwang, and Conrad's reports which provided findings obtained from audits; and similarly, Turner, Warren, Hwang and Conrad "expected" the Supervisory Committee to "rely on the thoroughness, accuracy, integrity, independence and overall professional caliber of audits it performed. Wouldn't it seem reasonable that a firm providing services to numerous Credit Union's and whose peer review cites an adherence to industry standards, make every effort to ensure the information provided to the Supervisory Committee was accurate and obtained from a thorough review of Priority One's records? 

Many past employees of the Credit Union can testify that documentation presented to auditors was always first reviewed by Executive Vice President, Rodger Smock, who was seen pulling out documents he did not wish presented to auditors. His censorship was intended to obstruct the disclosure of any information which could reveal breaches in procedure. 

CUMIS has chosen to accuse Turner, Warren, Hwang and Conrad of violating professional auditing and ethical standards and alleges the firm failed to properly examine Credit Union "books, records, and general ledgers." We expect the accounting firm to provide more than statements from the Credit Union that supports their accusations including providing lists of what documents the President and Supervisory Committee ordered to be included in any number of audits. Because as CUMIS asserts, Turner, Warren, Hwang and Conrad were hired by the Credit Union and paid to perform a service, was the accounting and auditing firm ever instructed not to audit certain credit union records?  Ultimately, it was the Credit Union who retained full control over what should and what should not be audited.  

It's seems more than a tad hypocritical that since Charles R. Wiggington, Sr. was appointed President on January 1, 2007, that the Credit Union has been sued several times and accused of egregious violations of state and federal laws, yet CUMIS and the Credit Union have no problem leveling accusations impugning the accounting and auditing firm and accusing them of violating "their professional auditing and ethical standards by failing to ever review or test the cash accounts at" the Los Angeles Branch.

In December 2009, then CFO, Manny Gaitmaitan, resigned but before leaving, confided to some members of his staff that he had been ostracized by President Wiggington; COO, Beatrice Walker; and then Senior Vice President, Rodger Smock, for his refusal to manipulate financial reporting." We hope that CUMIS is prepared to address questions regarding the Credit Union's reporting practices. 

 

In late 2009, TWHC conducted a three-week audit at the Los Angeles Branch and found that more than $60,000 had been stolen by a former receptionist. During the entire three-week audit conducted in a back office at the branch, AVP, Lynnette Fortson sat alongside auditor, Terry Nabors, while he examined Member and branch records. At the time, we found her inclusion in the audit both a conflict of interest and inappropriate but President Wiggington took absolutely no issue with her involvement. Could it be she sat alongside the auditor because she was concerned that he might uncover incidents that would reveal she was involved in the thefts of money? 

CUMIS accuses Turner, Warren, Hwang and Conrad of failing to count vault cash. Had they counted vault cash and reconciled those amounts with what was recorded in the vault's general ledger or reviewed the balancing sheets prepared by AVP, Fortson, they would have discovered the "fraud and embezzlement" committed by the AVP. Priority One has an internal auditor- Diane Huffman who should have been sent to each of the Credit Union's three remaining branches to audit records and count vault cash. Why wan't this done? And what about the responsibility the President, the COO, and the Accounting Department have to reconcile ledgers, balance sheets and cash records? 

CUMIS chose to pay out more than $980,000 against the $1 million claim filed by the Credit Union in 2013. We assume they agreed to pay the claim because their investigation proved that the Credit Union following all security protocols, yet this was the second large theft to occur at the Los Angeles Branch within a three-year period.  

• How did the Credit Union respond following the discovery in 2009, that a former receptionist absconded with more than $60,000 from the Los Angeles branch?

• What changes did Priority One introduce to its security procedures following discovery that more than $60,000 had been stolen by a former receptionist? 

We have to question CUMIS' wisdom. Why didn't the insurance company provide a more exact date when the theft of $1 million in cash began? According to their complaint, the thefts started either in "early" or "late 2010". Why not just state that the thefts began sometime in 2010?  We hope Turner, Warren, Hwang and Conrad have retained records showing what they were asked to audit. 

CUMIS requests the courts order Turner, Warren, Hwang, and Conrad to pay damages and all costs spent to file and litigate the lawsuit and any additional monetary relief deemed just and proper by the court.  

In his article, Strong Internal Controls Reduce Employee Dishonesty, dated August 20, 2014, Theran Colwell writes:

 "When a credit union catches an employee embezzling funds or committing other fraud, it must investigate and implement procedures to close the security breach."

Again, what changes did the Credit Union introduce following the discovery that more than $60,000 had been stolen by a former receptionist sometime in early 2009?

More importantly, why did the changes the Credit Union should have introduced fail to deter the series of thefts that started in "early" or "late" 2010 and continued, unnoticed, through late 2012?

In his article, Mr. Colwell also states: 

• Lead from the top with a written policy
• Create a system of checks and balances, including a clear segregation of duties
• Review cash-handling procedures and refresh staff training

Source: http://news.cuna.org/articles/39429-strong-internal-controls-reduce-employee-dishonesty

REVISITING THE 2013
SUPERVISORY COMMITTEE'S ADDRESS 

We are once again revisiting the Supervisory Committee's address which appeared int he 2013 Annual Report. The report was first distributed to attendees of the Annual Meeting which took place at Priority One's main branch in South Pasadena, California on May 27, 2014. 

The Supervisory Committee's Chair composed her address in 2014, approximately one year after Priority One discovered the theft of $1 million from the Los Angeles branch's vault. And though the series of thefts took place during the years of 2010 through 2012, the Supervisory Chair included the name of Turner, Warren, Hwang, and Conrad in her address published in the 2013 Annual Report which was first distributed on May 27, 2014. 

Why would Ms. Simmons make reference to the firm if she knew that CUMIS had concluded that Turner, Warren, Hwang, and Conrad had been remiss in their audits and allegedly caused the Credit Union to lose $1 million in cash? 

In her address, Ms. Simmons states, "The Supervisory Committee has the responsibility of overseeing the internal and external auditors of the Credit Union", adding, "The external audit firm of Turner, Warren, Hwang & Conrad Certified Public Accountants and Consultants conducts a comprehensive annual financial audit with verification of member accounts each year." 

Three conspicuous facts standout:

#1: In February 2013, Priority One's Internal Auditor discovered that $1 million had been embezzled from the Los Angeles Branch's vault. 

#2: CUMIS filed its lawsuit against Turner, Warren, Hwang and Conrad in April 2014. 

#3: Ms. Simmons address to Members was published in the annual report first distributed in May 2014, one month after CUMIS filed its lawsuit.  

We've also reviewed several of the Credit Union's annual reports for the years preceding 2013 and failed to locate a single address signed by Ms. Simmons and which alludes to Turner, Warren, Hwang and Conrad or any other external auditing firm hired by Priority One. 

So why did Ms. Simmons reference Turner, Warren, Hwang and Conrad's name in the 2013 Annual Report? Ms. Simmons is clearly stating that her Committee relies on whatever findings are provided by Turner, Warren, Hwang and Conrad. Is her disclosure a feeble and all too transparent attempt to free the Supervisory Committee of all culpability in the theft of $1 million?

Priority One may be a state-chartered Credit Union but its assets are federally insured by the NCUA. We obtained the following excerpt Cornell University Law School's Legal Information Institute, describing the role of a credit union's Supervisory Committee. 

12 CFR 715.3- General Responsibilities of the Supervisory Committee

§ 715.3 General Responsibilities of the Supervisory Committee

(a) Basic. The Supervisory Committee is responsible for ensuring that the Board of Directors and management of the Credit Union-

(1) Meet required reporting objectives; and 

(2) Establish practices and procedures sufficient to safeguard member assets.

(b) Specific. To carry the responsibilities set forth in paragraph of this section, the Supervisory Committee must determine whether:

(1) Internal controls are established and and effectively maintained to achieve the credit union's financial reporting objectives which must be sufficient to satisfy the requirements of the Supervisory audit, verification of Member accounts and additional responsiblities. 

(2) The Credit Union's accounting records and financial reports are promptly prepared and accurately reflect operations and results: 

(3) The relevant plans, policies, and control procedures are established by the Board of Directors are properly administered; and

(4) Polices and control procedures are sufficient to safeguard against error, conflict of interest, selfing dealing and fraud. 

CUMIS' lawsuit places responsibility for the theft of $1 million on Turner, Warren, Hwang and Conrad even though it is the Supervisory Committee who is ultimately responsible for the implementation of internal controls that effectively protect Credit Union and Member assets. 

• So what corrective measures did the Supervisory Committee implement in response to the 2009 theft of more than $60,000 perpetrated at the Los Angeles branch by a former receptionist? 

• Why did the Credit Union's internal controls fail to identify any of several thefts perpetrated over the years of 2010 through 2012? 

• And how often does the Supervisory Committee convene and what records can they provide of the topics discussed during each meeting and the actions taken to improve Priority One's internal controls? 

On a side note, it's important to note in 2008, Cornelia Simmons along with Board Directors, Diedra Harris-Brooks; O. Glen Saffold; and Thomas Gathers, voted and won reinstatement of President Wiggington despite overwhelming evidence that he sexually harassed a former employee and following urging by the investigator that the President be terminated. .These attest to her ethics and ability to hone decisions based on a fair and impartial assessment of evidence. 

The Supervisors like the Directors, are ignorant and unable to carryout their state-mandated duties. They and the Directors depend on the President to interpret financial data contained in the Credit Union's financial reports. Does this at all seem like a conflict of interest and immensely inappropriate? It's time the Supervisors and Directors were administered tests to gauge their competency. And one has to wonder, why procedures developed and/or approved by the Supervisory Committee have continually failed to protect assets administered by the Los Angeles branch.

CONCLUSION

It doesn't take an expert or even an in depth study of Priority One's monthly, quarterly, and annual reports to realize that this Credit Union's issues run deep and are terribly awry. What should be seen as perplexing is that the President, his executive and managerial staff, the Board of Directors and the Supervisory Committee are all apparently so out of touch that they can't understand the relationship that exists between internal conflicts, security breaches, abuses of authority, dishonest business practices, and the Credit Union's struggle to acquire new business and membership.

CUMIS Insurance is hoping to that their accusations against Turner, Warren, Hwang and Conrad will possess sufficient merit and be so compelling that a a jury (which they've requested) will issue a judgment in their favor. 

However, CUMIS will have to contend with questions about the Credit Union's subpar security procedures which failed to stop the theft of $60,000 in 2009 and the theft of $1 million in cash during the years of 2010 through 2012. The looming question we have is how could the Credit Union's allegedly well-developed security procedures fail so miserably? 

Here is a record of some lawsuits filed against or involving Priority One since October 2010? 

1. Lawsuits filed by four former employees during the years of 2010 through 2013, alleged sexual harassment, same-sex sexual harassment, retaliation, age discrimination, and creation of a hostile working environment. 

2. The filing of a lawsuit in 2012 by a former Member which accused the Credit Union of violating the Privacy Act.

3. The 2014 filing of a lawsuit by Alliance Auto, one of Priority One's contracted automobile brokers, alleging a breach in contract. 

4. The 2014 lawsuit filed by CUMIS against Turner, Warren, Hwang, and Conrad and alleging it is the accounting firm's satisfactorily perform its duties compliant to established standards resulted in the loss of $1 million in cash stolen by a former AVP. 

5. The 2014 filing of a lawsuit by Turner, Warren, Hwang and Conrad against Priority One Credit Union.

The lawsuits are all symptoms of a bigger, more serious problem afflicting Priority One and indicative of why the once successful Credit Union is nowadays a smaller, no longer competitive, and disliked Credit Union. The internal turmoil saturating the Credit Union explains in part, why Priority One was forced to close 6 of 9 branches during the period of 2010 through 2014. The Credit Union has spent years, desperately raising its net capital all for the mere purpose of retaining their operation. In 2008, its net capital dropped down to almost 6% and at the time, both the DFI an NCUA informed the President that he had better find an immediate means by which to reduce expenses and raise capital. His closures, however, could not stave-off the continued decline in net income which dropped by approximately $22 million since January 1, 2007.

President Wiggington's business failures are exacerbated by his personal conduct which has been appalling and embarrassing. In 2008, an investigation proved he sexually harassed a former employee though fortunately for the President, his ally, Board Chair, Diedra Harris-Brooks, ignored and suppressed the evidence and led two other Directors and Supervisory Committee Chair, Cornelia Simmons, to vote for his reinstatement despite the fact the investigator urged his termination. 

In the end, a victory in court will be gotten by the attorney who presents the most convincing argument. For CUMIS, this isn't a slam dunk as they have chosen to continue a business relationship with an organization led by a notorious President and corrupt Board of Directors and evidently, ineffective Supervisory Committee. On the other hand, Turner, Warren, Hwang, and Conrad chose to enter into and maintain a business relationship with the infamous Credit Union and as of May 2015, their well-earned reputation in the industry is at stake.  

l