- Prosecutors say the scheme began when the manager started siphoning money from members’ accounts to cover his own credit card bills.
- Ultimately he stole more than $40 million before being caught, court documents allege.
- “He kept going as it snowballed as he tried to cover his activity,” police wrote in an affidavit.
A credit union manager in California was arrested on charges of embezzling over $40 million in members’ money over the course of a 30-year career, the Department of Justice said last week. A month after his arrest, his former employer, CBS Employees Federal Credit Union, was liquidated with just $21 million in assets.
The suspect, 62-year-old Edward Martin Rostohar, allegedly started siphoning money from the credit union about 20 years ago, to cover his credit card bills, according to a complaint filed in federal court in California. “He kept going as it snowballed as he tried to cover his activity,” police wrote in an attached affidavit.
Rostohar allegedly used the stolen money to buy a Porsche, a Tesla and “expensive watches,” as well as to start a cafe in Reno, Nevada; give his wife a $5,000 weekly allowance; and to gamble frequently, which is how he lost the bulk of it, the complaint alleges.
The supposed scheme came to light on March 6, when an assistant manager at the credit union “stumbled upon” a $35,000 check payable to Rostohar, court documents say. Looking for an explanation, the assistant manager found that nearly $3.8 million in checks had been made out to Rostohar since January of last year. The member services representative whose signature appeared on the checks denied signing or knowing about them, according to the affidavit.
Less than a week later, on March 12, the credit union told Rostohar he was suspended. He “was escorted out of the office without saying a word,” according to the court documents. Shortly after, a woman called 911 saying that her husband had stolen money from work and was about to leave the state. Police arrested Rostohar at the address the caller gave, as he was pulling out of his garage. Police wrote in the affidavit that Rostohar’s wife “did not appear to know the magnitude” of the alleged theft.
Before coming to the CBS Employees Federal Credit Union, Rostohar told police that had worked a decade earlier as an auditor at the National Credit Union Administration, the federal agency that regulates these institutions, according to court documents. Prosecutors say because of that background, he knew what regulators looked for when assessing for potential fraud. The complaint alleges that Rostohar would issue a blank check, using a clearing account that belonged to the credit union, and manually type in an account holder’s name. Once the check was issued, he would allegedly insert his own name and deposit it into his personal account at Citibank or Chase.
Rostohar has no criminal history, the complaint says. He faces felony charges of bank fraud and aggravated identity theft, and is scheduled to be arraigned April 18.
The CBS Employees Federal Credit Union was liquidated March 29, the NCUA announced. Los Angeles-based University Credit Union took over its accounts and its assets, which were just $21 million. It’s unclear if the liquidation is related to the alleged scheme.
The losses are covered by an insurance fund paid into by credit unions, so no member money was affected, said David Tuyo, president and CEO of University Credit Union. “We believe the cooperative is stronger from 2,600 new members,” he said.
CBS Corp. declined to comment.