LOS ANGELES (CN) – Former customers of the CBS Employees Federal Credit Union claim in a class action lawsuit that they are owed $40 million due to a lack of oversight over an ex-CEO who embezzled millions over the course of 20 years and spent the money lavishly on multiple homes, private jet travel and other luxuries.
The actions of Edward Rostohar led to the banking institution’s bankruptcy. Rostohar pleaded guilty to felony bank fraud this May and was only exposed in March after a union employee found a $35,000 check payable to the former CEO, according to the complaint filed in Los Angeles Superior Court Friday.
Victor Webb, a retired CBS employee with over 40 years at the company and the lead plaintiff in the putative class action suit, said he was not able to “benefit from lower fees or higher interest returns on his savings account” at his credit union because Rostohar depleted the vaults.
An audit by the same employee who discovered the odd check revealed that $3.8 million in checks had been made out to Rostohar over the course of a little more than one year. The putative class action suit alleges that the lack of oversight from the credit union’s management allowed Rostohar to commit the fraud.
According to the Department of Justice, Rostohar made online payments from the credit union to himself or forged signatures of other credit union employees on checks made out to himself. He also falsified records to hide his scheme and made the credit union think it was profitable while it hemorrhaged $40 million.
Rostohar also started a coffee business in Reno, Nevada, in 2018 and funded its operations through embezzled money from the credit union.
Webb is suing all of the credit union’s former board members for negligence, breach of fiduciary duty and other claims.
“Because of their positions of control and author as directors of CBS Employees, director defendants were able to and did, directly or indirectly, exercise control over the wrongful acts detailed in this complaint,” he said in the complaint.
Webb is represented by Richard McCune of McCune Wright Arevalo.
CBS Employees Credit Union customers were notified on March 29 that they were absorbed by University Credit Union, which was approved by the National Credit Union Administration. Webb also names University Credit Union as a defendant.
There were nearly 2,800 members of the credit union when the bank was dissolved.
University Credit Union did not immediately respond to a request for comment Monday.