# €700k missing from Rush Credit Union



## Brendan Burgess (3 Jun 2016)

According to Charlie Weston, they gave out loans in members' names, but the members knew nothing about them.  It was probably just one rogue employee on the fiddle. 


"It is understood that forensic accountants from Grant Thornton, appointed by the board of Rush Credit Union, have uncovered evidence that fake loans were created on the accounts of members.

And it is understood there are no records of some deposits taken from members."


With over 300 credit unions, it's probably a surprise that there are not more examples like this.


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## thedaddyman (3 Jun 2016)

In fairness, it happens in most financial institutions at some time or other. I've investigated a few of these in a past working life in a bank and worked in areas where it happened and not a pleasant experience.


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## Brendan Burgess (3 Jun 2016)

That is the point I was making about 300 separate credit unions. If there were a fraud in one of the 300 branches of AIB, it probably wouldn't hit the headlines. Mind you, if €700k was unaccounted for, it probably would. 

Brendan


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## Steven Barrett (3 Jun 2016)

Rush CU had been resisting merging with another CU. Not difficult to see why...


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## thedaddyman (3 Jun 2016)

Brendan Burgess said:


> That is the point I was making about 300 separate credit unions. If there were a fraud in one of the 300 branches of AIB, it probably wouldn't hit the headlines. Mind you, if €700k was unaccounted for, it probably would.
> 
> Brendan


 it usually does get public if there is a prosecution and the banks I've worked for had a zero tolerance when it came to trying to convict as it was a warning to other staff.


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## 44brendan (3 Jun 2016)

Internal fraud is always a systemic risk factor in all financial institutions. The main preventions are a strict procedural system on loan drawdowns with no 1 individual being in a position to sign off on each stage of the process. In any modern bank I have worked in it would take the combined collusion of 3 or 4 employees to drawn down a loan fraudulently. Alternative poor implementations of procedures could leave gaps in the system. It would be interesting to see whether correct procedures were in place in this CU and if so how they were circumvented!


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## Steven Barrett (3 Jun 2016)

According to the Indo's update on the story:


> One source familiar with the situation said: "There seems to have been two books recording the deposits, one official, and one under the counter. The level of deposits are not reconciled.



I'm not sure if they literally mean deposits were written into a book, but it wouldn't surprise me if there was no computerised system to record deposits and loans.


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## thedaddyman (3 Jun 2016)

44brendan said:


> Internal fraud is always a systemic risk factor in all financial institutions. The main preventions are a strict procedural system on loan drawdowns with no 1 individual being in a position to sign off on each stage of the process. In any modern bank I have worked in it would take the combined collusion of 3 or 4 employees to drawn down a loan fraudulently. Alternative poor implementations of procedures could leave gaps in the system. It would be interesting to see whether correct procedures were in place in this CU and if so how they were circumvented!



Division of duties was always a key control but you wonder in a small CU if they had sufficient staff numbers in place to allow it to happen properly. Payments processing is always a bigger risk as low value transactions are probably not monitored but over a period of time, they all add up


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## MrEarl (7 Jun 2016)

SBarrett said:


> Rush CU had been resisting merging with another CU. Not difficult to see why...



I seriously doubt the two matters are related, if they were then it would imply that an influential number of the Board of Directors were involved, or at the very least were aware, of the fraud.

The size of a credit union, or the number of credit unions in existence, does not determine whether there is a risk of fraud or not.  This incident is being used by some to push an agenda, to see the CUs compelled to merge regardless of whats best for them, or what the owners of each CU want done with the CU that they own.  

It doesn't matter how big or small an institution is - if you think it does, then how do you explain what happened at such large institutions as Enron, Barings, AIB etc ? 

The questions that should be asked in this instance are questions such as:

Why did the internal auditor not discover this fraud at an earlier stage, if it has been going on for quite a while (as it would appear) ?

Why did the external auditors not pick up on it, while inspecting sample entries across the share lodgements and loan transactions ?
Has the Regulator (Central Bank) been found wanting ... again ?

Regretfully, when all is said and done, if someone wants to defraud you then they will find a way.  The best that can be done is to severly restrict the potential for fraud and thereafter, ensure there is damage limitation (by way of suitable controls, insurances where available etc.).


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## 44brendan (7 Jun 2016)

MrEarl said:


> Regretfully, when all is said and done, if someone wants to defraud you then they will find a way. The best that can be done is to severly restrict the potential for fraud and thereafter, ensure there is damage limitation (by way of suitable controls, insurances where available etc.).


Yes I fully agree with this! Unfortunately, despite significant evidence to the contrary there does appear to be an absence of regularized standardized control checks in many financial institutions (both large and small) that should spot these fraudulent transactions at an early stage. From experience I have learned that unless there are good checking and control systems in place people who would normally never consider stealing are tempted and quite frequently test the system. If they don't get caught at an early stage they tend to up the ante and eventually the amounts taken are too significant not to be missed!


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## cbreeze (1 Nov 2016)

44brendan said:


> Yes I fully agree with this! Unfortunately, despite significant evidence to the contrary there does appear to be an absence of regularized standardized control checks in many financial institutions (both large and small) that should spot these fraudulent transactions at an early stage. From experience I have learned that unless there are good checking and control systems in place people who would normally never consider stealing are tempted and quite frequently test the system. If they don't get caught at an early stage they tend to up the ante and eventually the amounts taken are too significant not to be missed!


more today from Charlie Weston
http://www.independent.ie/opinion/c...fle-scam-but-no-one-is-laughing-35177750.html


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## ?guy (2 Nov 2016)

With the latest news no this (http://www.independent.ie/business/...h-credit-union-to-be-wound-down-35181193.html)

I understand deposits under 100k are covered under the guarantee , but what is the normal protocol for members who have loans , Should they continue to pay them ? are the loans transferred to another CU or the government ?


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## willyfones (2 Nov 2016)

The debt will be bought out probably by another Credit Union,, the loan repayments will be transferred over..  all loans will still have to be repaid.

I would really like to see the criminal activity at this Credit Union dealt with severely..    it is a terrible betrayal of trust and fraud at its worst..

Audit practices are largely a box ticking exercise and if you had two sets of accounts,, it would be fairly easy to cover your tracks... However, the board have a lot to answer for..


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## MrEarl (2 Nov 2016)

willyfones said:


> The debt will be bought out probably by another Credit Union,, the loan repayments will be transferred over..  all loans will still have to be repaid.



Most likely, 

But if I were a member with borrowings and had funds available, I would try putting an offer in writting to the lads in Grant Thornton. Prior to cutting a deal with another credit union to sell the loan book, they might just take a reasonable offer to settle a loan (particularly as they are likely to have to sell the loan book at a significant discount when they do try and move it on).




willyfones said:


> *I would really like to see the criminal activity at this Credit Union dealt with severely..*    it is a terrible betrayal of trust and fraud at its worst..
> 
> Audit practices are largely a box ticking exercise and if you had two sets of accounts,, it would be fairly easy to cover your tracks... However, the board have a lot to answer for..




Agree entirely,

There is absolutely no way in the world that the people responsible cannot be held to account in the courts for what has happened here.

Also, I expect to see firm action taken against those proven to have been hiding cash and title to properties from the Revenue.

One of the things that baffles me is why the members were not crying foul play when one of the staff members won the car draw.  I don't think I can ever remember a situation where a competiton was held without the organisers and staff being excluded from winning etc.


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## Seagull (2 Nov 2016)

The manager is at least being sanctioned by the central bank. Now we wait to see whether criminal charges will be made against anyone.

From the Irish Times
It’s manager, Anne Butterly, was suspended by the board in March and the Central Bank subsequently went to court to have her suspended from a management position in any financial services firm for a period. This suspension was extended for a further three months in September.


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## bren1916 (3 Nov 2016)

Seagull said:


> The manager is at least being sanctioned by the central bank. Now we wait to see whether criminal charges will be made against anyone.
> 
> From the Irish Times
> It’s manager, Anne Butterly, was suspended by the board in March and the Central Bank subsequently went to court to have her suspended from a management position in any financial services firm for a period. This suspension was extended for a further three months in September.



My wife and I had an account there up until 2008 when a number of our lodgements went 'missing'. Luckily, I spotted it and was reimbursed the next day after meeting them & threatening them with the Financial Regulator. On reflection, I should have known something more was amiss when only one member of the CU attended the meeting with us...

Hopefully, there will be criminal prosecutions to serve as a deterrent.


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## Lightning (12 Nov 2016)

The Deposit Guarantee Scheme has paid out on 98% of the 9,700 members deposits.

The Deposit Guarantee Scheme covers sums under 100,000 euro. Also, deposits and loans can be netted when the Deposit Guarantee Scheme is called on.

The 2% of deposits where compensation was not paid were probably those with more than 100,000 euro or had loans as well as deposits.

I think this is the first time that the Deposit Guarantee Scheme has paid out since the IBRC liquidation. With the IBRC liquidation, both the Deposit Guarantee Scheme and the Eligible Liabilities Guarantee (ELG) Scheme paid out. These schemes covered the vast majority, but not all, of IBRC depositors.


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## G7979 (12 Nov 2016)

My housemate has received a cheque for his shares in the post. He had a question I couldnt answer. He had a car loan with the CU, he is foreign and was unaware of the situation and was very surprised to get a check for his shares, he has had no communication in relation to his loan, what happens to it? I see from the site the CU is open for loan repayments only, but a third party says he would be mad to pay it back. Moral issue and bar stool economics aside what happens to the outstanding loans? Should he wait to receive communication on this, wait for someone to buy the loans? The shares would have cancelled out the loan with only a nominal amount remaining. I have read the above post about the probable actions that will be taken but what should happen in the short term?


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## happypat (21 Nov 2016)

CiaranT said:


> The Deposit Guarantee Scheme has paid out on 98% of the 9,700 members deposits.
> 
> The Deposit Guarantee Scheme covers sums under 100,000 euro. Also, deposits and loans can be netted when the Deposit Guarantee Scheme is called on.
> 
> ...




It paid out for Berehaven Credit Union too.  Also, it says that only the arrears of loans can be netted against the payments.

Other info here including what happens to the loans...:

[broken link removed]


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## JohnJay (21 Nov 2016)

apparently they cant find the "winners" of 15 car draws. http://www.thejournal.ie/rush-liquidator-3094180-Nov2016/

How could this happen without someone smelling a rat? We laughed at the Fr Ted episode, but this is more bizarre!


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## cbreeze (25 Nov 2016)

I'm in the Progressive Credit Union and the Car Draw is usually held at the AGM.  Before my local Credit Union merged with the PCU there was an annual car draw and the supplier of the car was usually present for the photograph - so fairly public.  As Rush CU were not holding AGMs for a few years the membership might not have known that so many cars were being purchased.  You might expect there to be a draw for one car per year, not a whole fleet!  It would be interesting to see who the car dealer was.  Edited: from previous post above: Neary Motors (Lusk)


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## willyfones (25 Nov 2016)

It would be fairly common for credit Unions do a Car Draw every month with often 2 in December,, the members would pay about 2- 3 euro a month or so to entry the draw..  In my Credit Union members (like myself) in the draw keep a close eye to check if they have won each month..  So I would find it incredible that no members of Rush Credit Union ever asked "have I won the Car draw this month?"  or "who won this month"...

I suspect there record keeping of the Draw is probably dodgey or non existant..   I would have thought a quick check with the Car Dealer involved would solve the mystery fairly quickly. 

Either way I really hope any criminal activity would be dealt with severely.


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## Bronte (25 Nov 2016)

JohnJay said:


> apparently they cant find the "winners" of 15 car draws. http://www.thejournal.ie/rush-liquidator-3094180-Nov2016/
> 
> How could this happen without someone smelling a rat? We laughed at the Fr Ted episode, but this is more bizarre!



1. Were cars actually purchases in the first place, there has to be a trail
2. Did the car dealer deliver the cars
3. Were the cars returned to the car dealer
4. Were the cars sold to someone else, engines have unique number and there is a log book too. 

I'm sure the gardai are looking into this and will no doubt have already solved the car issue. 

I understood a lot of these cars could be returned for cash.  Because not everyone wants a car.


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## sunnydonkey (27 Nov 2016)

They could have been virtual car draws, appearing on the books but never publicised, allowing the cost of the cars to be disappeared.


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## Willy Fogg (30 Nov 2016)

G7979 said:


> My housemate has received a cheque for his shares in the post. He had a question I couldnt answer. He had a car loan with the CU, he is foreign and was unaware of the situation and was very surprised to get a check for his shares, he has had no communication in relation to his loan, what happens to it? I see from the site the CU is open for loan repayments only, but a third party says he would be mad to pay it back. Moral issue and bar stool economics aside what happens to the outstanding loans? Should he wait to receive communication on this, wait for someone to buy the loans? The shares would have cancelled out the loan with only a nominal amount remaining. I have read the above post about the probable actions that will be taken but what should happen in the short term?



The loan book will most likely be gobbled up by another institution, so in the short term it would be payments as usual. Same as pretty much happened with the others CU's that went bye bye, such as Newbridge etc.


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## MrEarl (30 Nov 2016)

Willy Fogg said:


> The loan book will most likely be gobbled up by another institution, so in the short term it would be payments as usual. Same as pretty much happened with the others CU's that went bye bye, such as Newbridge etc.



Interesting choice of words "gobbled up"... buying that loan book would not be without it's risks, you woudl need the following:

- Absolute certainty that the loans were all legitimate
- Absolute certainty that all paperwork was in good order (i.e. all documents present, signed, dated and witnessed correctly etc)

Also, there may be issues trying to get everyone to honour the payments, with various allegations and disputes likely to arise

... lots of very careful due dilligence required by the people in Progressive Credit Union before any formal bid should go in for this loan book, imho.


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