Gambling Credit Union Manager Gets 14 Years for Embezzling $40m

  • Former manager of federal credit union embezzled funds for nearly two decades
  • Scheme left 43 depositors with "deep losses" of around $7.3m
  • Accused would send online payments to himself or forge checks
  • Funds were used to gamble, take trips on private jets, and buy luxury items
man in suit handcuffed and holding dollar notes
A former credit union manager was convicted of embezzling $40m over two decades and sentenced to 14 years’ imprisonment. [Image: Shutterstock.com]

A federal prison sentence

Edward Rostohar, a manager who worked for the CBS Employees Federal Credit Union over many years, got a 169-month federal prison sentence for the embezzlement of $40m.

The embezzlement took place over nearly twenty years and saw Rostohar spend a lot of the funds on gambling. The 62-year-old Studio City native was sentenced by United States District Judge Otis D. Wright II on Monday. 

It was on May 20 that Rostohar was originally convicted, after he pleaded guilty to bank fraud. He has remained in custody since his arrest on March 15. 

The credit union’s inevitable fate

The National Credit Union Administration liquidated the CBS Employees Federal Credit Union and shut it down on March 29. This was because it was no longer solvent and had no chance of becoming viable in the future. The University Credit Union assumed the remaining CBS Employees’ assets and liabilities. 

On August 12, employees filed a class-action lawsuit worth $40m against CBS. The sentencing memorandum of the prosecution in this case made clear the details about the embezzlement. It spoke about how

[Rostohar] has the moral culpability of someone who was willing to leave as many as 43 depositors with deep losses.”

Those who lost out

There were 43 individuals who had deposited funds of more than $250,000. As the Federal Deposit Insurance Corporation (FDIC) currently only insures deposits up to $250,000, the depositors suffered significant losses. These amounts, which totaled about $7.3m, were later refunded by the credit union before it was shut down. 

Rostohar allegedly used the depositors’ money to buy $100,000 watches, take international trips on private jets to impress young women, host large gambling parties, and buy new vehicles regularly. He also gave his wife a weekly allowance of $5,000. 

The workings of the embezzlement

The embezzlement began in 2000 and continued to take place right until March 2019. The defendant was using his position as a manager at a credit union, which is federally insured, to regularly send online payments to himself.

The fraud began by Rostohar paying off the balances of his credit cards each month. He would also forge the signature of another worker on checks written to his name and lodge them into personal bank accounts. 

Finally found out

It was on March 6 that the scheme was finally found out. This was after an employee at the credit union found a check for $35,000 that was payable to the defendant, when there was no reason for him to be receiving that sum.

$3,775,000 worth of checks paid to Rostohar  

The employee then carried out an audit of other credit union checks that had been issued since January 2018. They found that there was $3,775,000 worth of checks paid to Rostohar during this period. 

Following this revelation, Rostohar was suspended from his position at the credit union on March 12. The credit union board informed him this was due to the findings of an internal investigation concerning “irregularities in the performance” of his job duties. 

The arrest and its aftermath

On that same day, Rostohar’s wife rang 911 and told them that her husband had stolen funds from his workplace and was planning to flee the country. This led to him being taken into custody on March 15, when he admitted his guilt. 

Since his arrest, Rostohar has been working with an investigator from the National Credit Union Administration to detail how he got away with this fraud for so long. It was revealed that he previously held the role of examiner at the National Credit Union Administration, which gave him insider knowledge on how to avoid detection.

In a letter to the court, Rostohar apologized to the staff, members and the board of the credit union. The prosecution had been looking for a 12.5-year sentence, but the judge added another 18 months.