A former branch manager and loan officer admitted Monday to defrauding nearly $1.5 million from an Alabama credit union and manipulating credit scores or overinflating the value of vehicles to approve more than 250 car loans.
Jennifer Leigh Arnette of Enterprise, Ala., who joined the $32.5 million IAM Community Federal Credit Union in Enterprise in 2006 and worked as a branch manager and loan officer until she was fired in April 2013, agreed to plead guilty to financial institution theft, according to court documents filed by federal prosecutors in U.S. District Court in Montgomery, Ala.
“The investigation took three and a half years to bring it to this stage, and we’re just glad that justice prevailed in this issue,” IAM Community FCU President/CEO Frank Garrett said Tuesday.
According to federal prosecutors, Arnette admitted she stole funds from the credit union’s cash account, a dead member’s account and unilaterally increased her personal loan without authorization.
Court documents also reveal Arnette approved 170 car loan applications, knowing that the credit scores were manipulated by 10 points or more, including 71 applications for which the credit scores were changed by 100 points or more.
She also approved auto loans by over stating their value by listing premium options that never existed such as superior engine, sport package and premium trim package. For other cars, she listed that the autos were upgraded with a new body type and wheels or had an auto theft recovery system installed. Arnette approved 64 car loans knowing that the cars were overvalued by $1,000 or more, including 22 loans in which the car values were overpriced by $5,000 or more, according to court documents.
Although the car loan scheme caused the credit union to misapply funds and approve loans beyond its acceptable risk levels, court documents do not specifically indicate whether Arnette personally benefitted from approving these car loans.
Although Garrett said he did not know whether Arnette personally benefitted from approving these car loans, he also said an investigation is ongoing. He declined to provide details about it. Assistant U.S. Attorney Bradley G. Bodiford declined to comment about the car loans when reached Monday.
Arnette’s sentencing hearing is scheduled for Oct. 25.
Garrett said Arnette’s fraud contributed to the credit union’s financial woes.
At the end of 2012, the credit union posted a net loss of $715,638 and a net income loss of $1.2 million by December 2013. IAM Community also had a net income loss of $164,539 in 2014, but turned a net income gain of $154,070 in 2015. In 2016 and at the end of 2017’s first quarter, however, the credit union recorded a net income loss of $561,165 and $87,145, respectively, according to NCUA financial performance reports.
Despite these losses, the credit union maintains a net worth of 8.63%. Garrett said IAM Community is not in danger of being placed into conservatorship.
In July 2013, about three months after she was fired, Arnette declared Chapter 7 bankruptcy. Court documents show she was unemployed and posted debts of more than $86,000.
Bankruptcy records also show that Arnette was sued by an IAM Community member who claimed that the former branch manager withdrew “several thousands of dollars” from the member’s account. The lawsuit also alleged that Arnette changed the member’s account to an online-only statement accessible account so that the member would not receive her monthly statements.
In February 2014, Arnette agreed to pay the member $25,000, according to court documents.
Arnette’s bankruptcy case was terminated in March 2014.
