On Monday, May 20, the former manager of the CBS Employees Federal Credit Union pleaded guilty to bank fraud. There are many different forms of bank fraud, but this case deals with the embezzlement of $40 million from the Studio City-based entertainment giant.
Although women are more likely to embezzle, committing 51% of embezzlement crimes, Edward Martin Rostohar of Studio City is the guilty party in this case. According to the U.S. Attorney’s Office, Rostohar could receive a sentence of up to 30 years in federal prison for his crime. Rostohar was arrested on March 12 and has been in federal custody since, as the court considered him a flight risk and economic danger to the community at the time of his arrest.
According to his plea, Rostohar admitted to embezzling this staggering amount of funds over the course of two decades. His illegal actions were only discovered this past March when a fellow employee found a check for $35,000 made payable to Rostohar. Finding this suspicious, the employee conducted an audit and discovered $3.8 million in checks made payable to Rostohar between January 2018 and March 2019.
After this revelation, the credit union suspended Rostohar on March 12. Later that day a woman contacted a select few of the 662,390 police and sheriff’s patrol officers by calling 911 to say that her husband had stolen money from his job. She also said that he was preparing to leave the country. Federal officials took Rostohar into custody the next day.
“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 [the] credit union appear to be profitable despite it suffering more than $40 million in losses as a direct result of his scheme,” said the District Attorney’s Office in a statement.
The CBS Employees Federal Credit Union was so impacted by Rostohar’s shady operation that the National Credit Union Administration decided to liquidate it on March 29. The NCUA had determined that the CBS credit union was insolvent. At the time of its insolvency, the credit union served about 2,800 CBS employees and had $21 million in assets.
Rostohar initially used the stolen funds to pay off his balances personal credit cards. Once the balances were paid, he didn’t invest his stolen funds in ventures that could capitalize on them or profitable personal projects such as bathroom additions, which can result in an ROI of 86.4% on average. Instead, Rostohar gambled away the majority of the $40 million.
Even after these betting losses, Rostohar was still able to indulge in some personal luxuries. He gave his wife a $5,000 weekly allowance and bought homes in Mexico, Nevada, and Studio City. Rostohar used some of the money to be among the 79% of domestic trips that are for leisure purposes by paying for travel by private jet. The money also went towards a Tesla, a Porsche, expensive watches, jewelry from Tiffany, and the opening of a cafe in Reno.
Typically, the financial checks and balances in the American system would catch Rostohar’s strange influx of cash and exorbitant spending. In fact, the IRS can keep such a close eye on an individual’s personal funds during tax season that if they request a bank to levy a customer’s account, they can put that person’s fund on hold. If they aren’t paid the money they’re owed after 21 days, they will deduct that amount themselves from the customer’s account. Rostohar was able to get around all of these checkpoints by directing the stolen money to shell companies.
According to authorities, Rostohar has agreed to turn over the remaining funds in his possession as well as the property and goods he bought with the stolen money. U.S. District Judge Otis D. Wright II has scheduled a sentencing hearing on September 16 for Rostohar.
linda tlemsani, cbs employees federal credit union, doj federal credit union, cbs credit union, edward rostohar.