News and Press Releases

United States Attorney Jenny A. Durkan
Western District of Washington

Sophisticated Scheme Nets Former Employee $440,000 Over Several Years

April 4, 2011

EDGAR HUGH KELLY, 37, of Tacoma, Washington, was sentenced late Friday to 33 months in prison, three years of supervised release, a community service obligation, and $440,000 in restitution for Theft from a Lending, Credit, or Insurance Institution. KELLY was employed for nearly 13 years as a teller and office manager at KBR Credit Union, a small credit union serving employees of Simpson Construction. An internal audit in 2010, revealed that KELLY had embezzled large amounts of cash from the credit union for his own use. KELLY used his knowledge of the credit union’s practices to hide the thefts for several years. The loss to the credit union was $440,000. At sentencing U.S. District Judge Benjamin H. Settle said that he was particularly troubled by KELLY’s severe breach of the public’s trust, noting that “if people can’t trust their financial institutions to protect their money, then our society is in a lot of trouble.”

The theft from KBR came to light in early 2010, when auditors started asking KELLY for documents related to the credit union’s accounts held with other banks. KELLY submitted false records showing there had been no loss of funds from those accounts. Once the auditors uncovered the false documents and the theft, KELLY was fired. Subsequent investigation unraveled KELLY’s elaborate scheme, which involved strategically timed fund transfers and altered financial documents. KELLY was charged in October 2010, and pleaded guilty in November 2010.

In their sentencing memo, prosecutors highlighted the sophistication of the scheme. “His theft involved an ongoing scheme that he successfully operated for years by concealing his criminal conduct through the creation of a float, the numerous fabricated bank records, and false accounting entries.... For years, he essentially used KBR Credit Union as his personal piggy bank. This was not a one-time opportunistic crime, but rather a deliberate and methodical fraud upon a federally insured financial institution motivated purely by greed,” prosecutors wrote in their sentencing memo.

The case was investigated by the U.S. Secret Service. The case was prosecuted by Assistant United States Attorney Steven Masada.

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