Members of the board of directors and supervisory committee for the CBS Employees Federal Credit Union face a proposed class action lawsuit that alleges their failure to exercise reasonable oversight allowed former manager and CEO Edward Martin Rostohar to embezzle more than $40 million over 20 years.
The case out of Los Angeles County Superior Court says Rostohar in May 2019 pled guilty to operating a 20-year embezzlement scheme that saw the credit union’s cash wiped out. According to the lawsuit, Rostohar, who according to his plea agreement wielded his position to make online payments from the credit union to himself and forged the signature of another employee to make checks payable to himself, used the embezzled money to “fund his gambling and luxury lifestyle,” destroying the credit union in the process. The suit stresses that the credit union was, in the end, liquidated with just $21 million in assets.
The non-profit and now-defunct credit union, through which members should have been afforded lower fees on checking account and ATM services and savings on loans, among other benefits, was founded in 1961 to provide financial services for employees of CBS, Mary Tyler Moore Productions and CBS/MTM who worked out of Studio City, California, the lawsuit says. Rostohar’s scheme was exposed, the case goes on, when a credit union employee discovered a $35,000 check payable to Rostohar, which then prompted an audit that found $3.8 million in checks payable to Rostohar made out between January 2018 and March 2019. The complaint adds that Rostohar hid the stolen funds in shell companies under his control.
As the lawsuit tells it, Rostohar’s embezzlement would have been discovered much sooner had the defendants exercised reasonable oversight of the CBS Employees Federal Credit Union.
“Individual Defendant members of the CBS Employees Supervisory Committee, at all times relevant herein, are and were tasked with asking the tough questions and following up on findings with management to ensure that remediation takes place and ensure the Board of Directors is safeguarding assets,” the suit reads.
As of March 29, 2019, members of the CBS Employees Federal Credit Union are now members of University Credit Union of Los Angeles, according to the case.