Derby Credit Union Manager Sentenced to Three Years for Fraud

The Office of the United States Attorney for the District of Vermont stated that Debra Kinney, 59, of Derby, Vermont, was sentenced to three years’ imprisonment yesterday, followed by five years of supervised release. Kinney also was required to pay full restitution, and a forfeiture judgment of $250,000 was entered against her.

Debra Kinney was the manager of the Border Lodge Credit Union in Derby, Vermont. In November 2012, the Federal Bureau of Investigation, along with state and federal bank regulators, searched the credit union and seized the documents and operations of the financial institution based on evidence of widespread fraud and misappropriation of accountholders’ funds. After an ensuing investigation, the manager of the credit union, Kinney, was indicted for misappropriation of credit union funds. Federal credit union regulators permanently shut down and liquidated the assets of the credit union.

Debra Kinney pled guilty to the federal fraud charges in January 2014. At the sentencing hearing yesterday before Judge William K. Sessions, III in Burlington and in court papers, the United States asserted that Kinney had defrauded Border Lodge Credit Union accountholders of over $633,000. Kinney’s acts of embezzlement occurred over a period of years. According to court papers, Kinney would frequently write checks to herself or for her benefit or for that of family members drawn from credit union accountholders without authorization. A subsequent financial investigation determined she removed hundreds of thousands of dollars from multiple accountholders. All told, the investigation revealed improprieties with 33 different accounts.

All the losses of individual accountholders were insured by the National Credit Union Administration, which insures credit union accounts up to $250,000. As part of the liquidation of the credit union, the National Credit Union Administration paid accountholders for losses they suffered. To date, Kinney has not paid any restitution.

The case was investigated by the Federal Bureau of Investigation, with significant assistance from the National Credit Union Administration and the Vermont Department of Financial Regulation.