NEW YORK–There appears to be more to the conservatorship of the $3-billion Municipal Credit Union than just a CEO who embezzled funds to pay for private limos and lottery tickets.
Several sources have told CUToday.info a $113-million liability on the credit union’s balance sheet reflects unfunded obligations to a defined benefits plan, or pension funds owed to employees.
It’s a figure that has grown steadily. Municipal CU’s statement of financial condition for year-end 2016 lists “Accumulated Other Comprehensive Loss” as $84,593,362. For year-end 2017, the same Financial Summary shows a figure of $100,455,454. Now, Municipal CU’s March 31, 2019 5300 reports a negative $113,084,113 under “Other Comprehensive Income.” Sources told CUToday.info that latter figure represents the unfunded pension obligations.
The majority of credit unions exited Defined Pension plans for most employees decades ago for the same reason as many other companies, the expense and lack of controls, especially when compared to 401(k) programs.
The reason the former board of Municipal CU—which has since been replaced as part of the conservatorship—stuck with the pension program is not known.
CEO Retains Rights to Pension
As CUToday.info reported here, in mid-May the New York Department of Financial Institutions conserved the $2.8-billion Municipal CU and assigned NCUA as conservator. The conservatorship followed the firing and arrest of its former CEO, Kam Wong, for embezzling nearly $10 million from the credit union to pay for everything from nearly $300,000 for dental work that was never performed to sham invoices to luxury cars to lottery tickets. Wong, who was once hailed as an American success story, has since been sentenced to 66 months in prison.
Sources told CUToday.info that despite Wong’s sentencing, he retains his rights to his pension, which could amount to more than $500,000 annually, because retirement benefits cannot be attached in legal proceedings to pay for debts or restitution.
NCUA Declines to Comment
NCUA declined to comment to CUToday.info to confirm the $113 million reflects unfunded pension liabilities, whether it is seeking any modifications for the plan if it is unfunded pension liabilities, or whether it is seeking to find a merger partner for Municipal Credit Union.
At the close of Q1, 2019, the CU's net worth was 7.59%, and ROA was .39%. Municipal made $11.4 million in 2018, and $17.5 million in 2017, according to Call Report data. The CU reported $2.8 million in net income Q1 2019.