The former lending manager of the $222 million 360 Federal Credit Union was sentenced to 21 months in federal prison last week for embezzling more than $840,000 from the Windsor Locks, Conn.-based cooperative
U.S. District Court Judge Robert N. Chatigny in Hartford ordered Patricia Mallory, 43, of Enfield to make restitution of $840,378 and to serve five years of supervised release following her prison term.
Mallory’s theft was discovered by credit union employees when they couldn’t find loan documents for HELOC loans.
“As we finally started to unravel her scheme, we discovered at Ms. Mallory’s desk that she was in the process of cutting and pasting signatures from other loans into new false documents to try and salvage her scam,” 360 FCU President/CEO Robert L. Aresti, wrote in a letter to Judge Chatigny. “With this evidence, we terminated her employment and kept digging.”
Mallory opened five different HELOCs from 2009 to 2016 in the name of an elderly credit union member that Mallory used to work for. She increased the credit limit of those HELOCs on at least 15 occasions without knowledge or consent of the member. Initially, Mallory perpetrated the scheme by opening subsequent HELOCs to pay off earlier, smaller HELOCs. Later, rather than opening new HELOCs, she increased the credit limits on two of the fraudulent HELOCs to support her spending. To evade detection, Mallory made minimum, interest-only payments on the HELOCs from her checking account, federal prosecutors said.
The credit union uncovered the scheme in January 2016.
Mallory began stealing from the credit union because her husband racked up more than $40,000 in debt. She was also married to a very abusive husband, which prosecutors did not dispute.
“During her marriage, Pamela Mallory had been raped, beaten, had her head pushed through walls, was thrown into the fireplace, body slammed to the floor, threatened with an axe and threatened with a gun, all by her husband,” Mallory’s lawyer, Robert B. Muchinsky, wrote in court documents.
He also abused their two daughters. When creditors would call, her husband became more violent by breaking furniture and beating Mallory.
“Pamela Mallory knew what harm her husband was capable of inflicting on her and her girls so she did the unthinkable and embezzled from her employer to satisfy her husband,” Muchinsky wrote. “Once she took the money, she felt she had no alternative to continue to pay down loans to keep it from becoming known.”
But prosecutors noted that while Mallory paid off her husband’s debt, she also used the funds she stole to pay for cruises, trips to Disney World, Jamaica, New York City, Washington, D.C., Boston, San Francisco, Florida, Maine, North Carolina, New Orleans, Vermont and New Hampshire. She also spent some of the credit union’s money at Connecticut casinos.
“To be clear, the government does not dispute the extreme abuse and hardship that Mallory faced during her marriage,” Federal Prosecutor John T. Pierpont Jr., wrote in court documents. “And the court should consider this as a factor in weighing an appropriate sentence. The embezzlement scheme, however, outlasted her marriage by more than three years. Mallory separated from her husband in May 2012. At that time, Mallory did not seek help, did not admit what she had done, and —- perhaps most egregiously — did not stop embezzling money. Instead she continued her pattern of manipulating credit limits and paying her creditors to support her and her family’s lifestyle for the next three and a half years.”
Nevertheless, the identity of the woman who Mallory used to take out the fake HELOC loans, wrote a letter to the judge and requested a lenient sentence.
Janibeth Johnson of Mansfield, Conn., said she hired Mallory as an assistant, noting she was very good at her job.
“For several years, Pam generously committed to weekday daily check-ins with me to make sure I was medically okay,” Johnson wrote in a letter to the judge. “She also actually helped me earn extra money by alerting me to a high-yield 5% plus limited-time offer of a bank CD which I did thankfully take advantage of just before the 2008 recession hit.”
She also noted that even though she was the “supposed victim,” she harbored no ill will because Mallory’s actions did not do permanent damage to Johnson.
But Aresti noted that while the credit union has been able to recover its financial losses through insurance, Mallory’s fraud did more than threaten the finances of 360 FCU.
“It was traumatic for the credit union’s employees and culture,” Aresti wrote. “It is important to understand that we are both a community institution and a community within ourselves — unlike a large bank — we are a medium sized financial cooperative that have witnessed the impact on my close-knit family of employees through economic downturns, heavy regulatory compliance efforts and personal hardships. I can tell you that none of those took the toll that this clear betrayal of trust did on so many of our employees. I will never forget the looks of disbelief, the gasps, and the tears I heard and saw as I delivered the news to them about Ms. Mallory’s crime.”
