Ex-Melrose CEO guilty in federal bribery case

The former Melrose Credit Union on Queens Boulevard in Briarwood.

The former CEO of the defunct Melrose Credit Union in Briarwood was convicted on bribery charges in Manhattan federal court on Thursday following a two-week trial.

Alan Kaufman was found guilty on two counts of bribery of a financial institution officer, according to a statement from the office of Audrey Strauss, U.S. attorney for the Southern District of New York.

The case evolved around Kaufman’s accepting gifts and other considerations from businessman Tony Georgiton in return for favorable interest rates on millions of dollars in loans to Georgiton. He was acquitted of one count of conspiracy to commit bribery of a financial institution officer.

Each guilty charge carries a maximum potential sentence of 30 years, though no other specifics were included in Strauss’ statement. Kaufman  is scheduled to be sentenced by U.S. District Judge Lewis Kaplan on June 23.

Georgiton accepted a plea deal back in September.

“A unanimous Manhattan jury has found that Alan Kaufman, the former CEO of Melrose Credit Union, accepted luxurious gifts from Tony Georgiton as a reward for favorable loan rates for his companies,” Strauss said in a statement on her office’s website.

“In doing so, Kaufman shirked his fiduciary obligation to act in the best interests of Melrose to instead exploit his control of union funds for his own personal gain," she added. “Melrose’s members certainly deserved better representation than Alan Kaufman, who placed his own selfish needs above theirs — and thanks to the work of the FBI, Kaufman and Georgiton both stand convicted of federal crimes.”

 Melrose’s main office was on Queens Boulevard. Kaufman’s grandfather was one of the co-founders of the institution back in 1922. Both he and Kaufman’s father served as CEO.

Prosecutors in the case showed that Georgiton allowed Kaufman to live rent-free in a house he bought in Jericho, LI, in 2010. While living there Kaufman personally approved the refinancing of over $100 million in loans from Melrose to a company owned by Georgiton.

“The head of Melrose CU’s loan department did not sign off on the loans given to Georgiton because, among other things, he believed the terms to be too favorable and did not comply with Melrose CU’s loan policy,” according to the U.S. attorney’s statement.

In 2011 Kaufman also sought approval from Melrose’s board of directors to buy the naming rights to a ballroom that was being built by a company owned by Georgiton. He did not disclose to the board that he was living in a house owned by Georgiton at the time. Over the next five years Melrose paid $2 million to Georgiton’s company for the rights.

Kaufman eventually bought the Jericho house with a loan from Melrose co-signed by Georgiton and secured with Georgiton’s shares in Melrose. He also gave Kaufman an unsecured $240,000 loan on which prosecutors say Kaufman has never made a payment.

Between 2010 and 2015, Kaufman also solicited trips and vacations from an unnamed media company and other vendors in return for approving advertising by Melrose.

Those included trips for Kaufman and his wife to Paris in 2010; to Hawaii in 2013; and to the Super Bowl in New Orleans in 2013. The trips were not disclosed to or approved by the Melrose board of directors.

Kaufman was removed by the MCU board in 2016. In 2017 Melrose was taken into conservatorship by the New York State Department of Financial Services.

The company was said to have about 80 percent of its loan portfolio tied up in taxi medallions, and the emergence of Uber, Lyft and other app-based car share services hit its clients and business interests hard.

Teachers Federal Credit Union obtained Melrose, its accounts and the Briarwood property in August 2018.

(1) comment

David Weinkrantz

Why is the name of the head of Melrose's loan department not named?

Why was the head of Melrose's loan department not given an opportunity to comment on the subject case and on the verdict?

What was the response from the New York State Banking Department (NYSBD) and its successor the New York State Department of Financial Services (NYSDFS), the National Credit Union Administration (NCUA), and Melrose's in-house auditor, and its outside auditor?

Was Melrose's in-house auditor, and/or its outside auditor sued by the NCUA or others to defray the NCUA's loss?

Were Georgiton and his company made to pay to defray the NCUA's loss?

Apart from his prison term, will Michael Kaufman be required to pay to defray the NCUA's loss?

Alan Kaufman is guilty as sin but some of the employees of the NYSBD, the NYSDFS, the NCUA, Melrose's in-house auditor, and its outside auditor should be questioned. Were they asleep at the switch? I think so.

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