Ex-Credit Union Manager Pleads Guilty to Bank Fraud in $40 Million Embezzlement that Rendered Institution Insolvent
LOS ANGELES – The former manager of CBS Employees Federal Credit Union pleaded guilty today to one felony count of bank fraud for embezzling $40 million from his employer over the course of 20 years – spending the money on gambling; homes in California, Nevada and Mexico; and travel by private jet – in a scheme that ultimately led to the credit union becoming insolvent.
Edward Martin Rostohar, 62, of Studio City, entered his plea before United States District Judge Otis D. Wright II, who scheduled a sentencing hearing for September 16, where Rostohar will face a statutory maximum sentence of 30 years in federal prison.
According to his plea agreement, Rostohar used his position as a manager at the credit union, a federally insured financial institution, to make online payments from the credit union to himself or by forging the signature of another credit union employee on checks made payable to himself. Prior to his three decades of employment at the credit union, Rostohar was a trained accountant and an examiner at the National Credit Union Administration (NCUA), a federal agency that regulates credit unions. During his approximately 20 years of embezzling from CBS Employees FCU, he used his senior position at the institution to falsify its records to hide his fraud and make credit union appear to be profitable despite it suffering more than $40 million in losses as a direct result of his scheme, the plea agreement states.
Rostohar sometimes disguised his unauthorized payments, and hid the proceeds of the fraud, by directing the stolen funds to shell companies he controlled, court papers state. Rostohar also admitted to submitting credit union checks to make personal credit card payments.
The scheme was exposed in March when a credit union employee, after discovering a $35,000 check payable to Rostohar, conducted an audit and discovered $3.8 million in checks made payable to Rostohar between January 2018 and March 2019. Rostohar told law enforcement he gambled away much of the money and spent the rest on traveling by private jet, buying expensive watches, and giving his wife a weekly allowance of $5,000, according to an affidavit filed with a criminal complaint in the case. Rostohar also started a coffee business in Reno, Nevada in December 2018, and he wrote tens of thousands of dollars’ worth of checks to himself to cover the business’s costs as well as to pay a $5,000 monthly mortgage on a home in Reno he recently purchased, according to court documents.
Rostohar has agreed to forfeit his ill-gotten gains, including bank accounts in his name and the names of his shell companies, four automobiles, including a Porsche, a Tesla and a Lexus, homes in Studio City, Reno, and Mexico, expensive watches, and Tiffany jewelry.
Rostohar’s long-running fraud resulted in the decision by the NCUA to liquidate the credit union and discontinue its operations after determining the Studio City-based CBS Employees was insolvent with no prospect of restoring viable operations on its own. In March, University Credit Union of Westwood assumed CBS Employees’ assets, loans, and all member shares. At the time of its liquidation and sale, CBS Employees served 2,798 members and had assets of $21,037,558, according to the credit union’s most recent Call Report.
Rostohar has been in federal custody since his arrest on March 13.
This case was investigated by the Federal Bureau of Investigation and the Los Angeles Police Department.
This matter is being prosecuted by Assistant United States Attorneys Andrew Brown of the Major Frauds Section and Victor Rodgers, deputy chief of the Asset Forfeiture Section.