The former chief executive of a failed credit union was sentenced Friday to 18 years in prison for stealing more than $16 million that was supposed to fund non-profit health clinics for poor families and the homeless.
After testimony from more than 50 witnesses and nearly 700 exhibits during an 18-day trial in May and June, a jury convicted Jonathan Wade Dunning, 53, of 62 counts of wire fraud, 33 counts of money laundering, two counts of bank fraud and one count of conspiracy.
Dunning was also ordered to pay restitution of $13.5 million that he embezzled over seven years and used the Birmingham Financial Federal Credit Union to carry out his fraudulent scheme.
From October 2008 to October 2011, Dunning was the president/CEO of the credit union and assumed other positions such as board chair and/or loan officer. He also ensured that the supervisory, management and oversight positions at BFFCU were occupied by individuals who would comply with directions from Dunning, according to court documents.
Dunning used the credit union to enrich himself through a variety of ways.
He caused deposits in the name of Birmingham Health Care to be transferred and deposited into his credit union account then stole the BHC funds exposing the credit union to loss through theft of funds on deposit. Before taking over the credit union, Dunning was the CEO of BHC. He later resigned from that post, but remained as a paid consultant to the non-profit organization that provided healthcare services to the poor.
He was also the CEO of the non-profit Central Alabama Comprehensive Health Inc., a Tuskegee-based organization that provided primary and preventive healthcare to the poor. He also resigned from CACH, but was retained as a paid consultant and also used that organization to carry out his fraudulent scheme through the credit union.
In addition, Dunning leveraged his control of the credit union to gain favorable treatment for himself and his businesses for loans, interest payments, transfers among accounts and other expenditures.
In one instance he recieved an $85,000 loan to buy a brand new Jaguar XJL without following the credit union’s loan applications procedures and policies, court documents show.
What’s more, evidence presented during the trial revealed that Dunning accepted $3.9 million in deposits from U.S. Sterling Capital Corp. even though he knew BFFCU could not meet the obligations those deposits imposed, which also jeopardized the financial soundness of the credit union.
That money, however, was returned only when the NCUA demanded that Dunning do so, according to court documents.
In the NCUA’s “confidential statement of grounds in support of order for conservatorship,” the federal agency discussed the improper solicitation of the $3.9 million in non-member deposits, which placed BFFCU in an extremely precarious financial position.
According to the NCUA’s confidential statement, BFFCU indicated that its strategy in obtaining the NMDs was to fund MBLs to the sponsor organization BHC and its affiliates. However, the NCUA noted in its confidential statement that there were a variety of problems with the so-called MBLs and the $3.9 million NMDs.
Federal prosecutors said that the NCUA was deceived into believing that BHC and CACH had received loans from BFFCU. Court testimony, however, proved Dunning laundered money through the credit union and falsely claimed that he was loaning money to those nonprofit groups.
“Dunning wanted to own a bank, and the evidence established that he utilized BFFCU as if its deposits were his own,” federal prosecutors said. “He issued payments and loans to himself and his associates while using the BFFCU to perpetuate the big lie that BHC owned debts to him and the Synergy Entities,” companies that Dunning controlled.
To protect the NCUSIF, the NCUA placed the credit union into conservatorship in October 2011.
The NCUA lost $122,088 that Dunning was ordered to pay back to the federal agency. The lion’s share of $13.5 million, however, was stolen from U.S. Department of Health and Human Services, the Health Resources and Services Administration, BHC and CACH.
“He caused CACH to close its doors, drove BHC to the brink of bankruptcy, cost employees of CACH and BHC their jobs, precipitated the collapse of a credit union, and caused additional harm to others in the process,” federal prosecutors said. “BHC and CACH had an essential mission of providing health care desperately needed by the communities they served. The defendant thwarted that mission and diverted the money and property to his personal benefit for one simple reason: greed.”
