The Experiment
Episode 04 / 10.20.26
A former NCUA examiner reviews four years of 712's financial reports without knowing how the credit union collapsed. He finds the warning sign on his own. Then he hears what happened, and what he believes an examiner on site should have caught. The credit union's own records raise a harder question.
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Previously, on Overdrawn
When I took over as manager I did not know how to balance a ledger or fold member statements. The previous manager said on many many occasions that it was her job to do those things and when I was the manager I could learn on my own. Just like she had.
I mean, we did know the family had a long history there… [t]o the extent she was criticizing her previous boss, it would've been her mother.
And, during that time I started to increase the limits on my credit card. I was just trying to keep everyone taken care of and I was trying to give my mind a break. I was so tired all the time. Constantly tired. …
She was opening credit cards, and it's not like she was using a fictitious name or anything like that.
I mean, they were in her name.
Helen MarinkovicThat is my question. How did you miss that Visa?
My name is Andy Janning, and this is Overdrawn, Episode 4: The Experiment.
Open and Setup
I've seen a lot of fraud in my time. From a scheme, this is new to me. It's isolated to one area, which is interesting. Usually you'll see the greed like a disease start to spread.
That is the voice of a man who is learning, for the first time and in real time, about the collapse of the 712 credit union and how it happened.
Up until a few weeks before this interview, he'd never heard of 712, this case, or this podcast. But the LinkedIn algorithm just happened to put a post of his at the top of my screen one day. By the end of his post, I knew I wanted his insights, because he's a former examiner for the NCUA, the National Credit Union Administration.
Can he discover what brought down 712, just by looking at their numbers? And can he help us understand how nearly a third of a $7.7 million credit union's assets ended up on Stacey Shaw's unauthorized credit cards? Because according to her defense attorney Samir Sarna,
You didn't have anything hidden really. This was all in plain sight had somebody just kinda looked at it and seen it.
So let's look.
I'm Joshua Herman, CEO of a boutique credit union CUSO holding company called CU Wealth Next. Prior to this, I was vice president of strategy at Frankenmuth Credit Union, and then started my career as an NCUA examiner in January of 2010. Shipped out to Washington DC, Alexandria area, got my training, examined everything from thirty thousand dollar Detroit church credit unions up to some of the largest credit unions in the state, so I got to see and experience a lot of different things in the credit union industry.
Joshua Herman examined federal credit unions for the NCUA from 2010 through the end of 2016. By the end of his tenure, he was a Principal Examiner and Capital Markets SME. He also served as an On the Job Trainer, was Rookie of the Year in 2011, and 2014's Examiner of the Group.
His LinkedIn post was about putting his former NCUA examiner hat back on and looking at the financial reports for Jackson Area Federal Credit Union, whose CEO has been alleged to have misappropriated around $90 million over more than a decade.* It's a case that's received a lot of attention, and raised many of the same questions that have swirled around 712's collapse, but with more years and zeros involved. Joshua Herman wanted to see if he would've picked up something just by looking at their financial reports.
I've been wondering the same thing about 712; what would an NCUA examiner have noticed in their reports, especially in and around the time that Stacey Shaw was CEO? And would it have been enough to prevent the credit union's involuntary liquidation?
A LinkedIn DM and a few emails later, and Joshua Herman agrees to take a look at 712.
You asked me to do one thing that I hopefully can still do on the back of my hand, which is take some financial performance reports, take some call reports that you're gonna send over, and just run through and do an analysis as if you were an examiner doing an off site review. What I knew and what I know now is about the same; obviously I know the name of the institution based on the FPR and call reports, but that's about it. I have no clue what happened, which is a little unnerving, going through and doing the analysis. But I'm assuming something happened, but that's all that I know about it.
Two terms to define quickly.
The Call Report is the detailed financial overview that federal credit unions are required to file with the National Credit Union Administration every quarter. The Financial Performance Report, or FPR, turns that same data into ratios and comparisons that help the examiner see what deserves a closer look.
I sent Joshua Herman both sets of reports from March 2016 through March 2020.
He knew these were from the 712 credit union. I told him that it had collapsed in 2020, and that I was making a podcast about it. I didn't tell him how or why 712 collapsed, though.
So this informal analysis wasn't a blind experiment for his credit union examination superpowers in the strictest sense. Joshua knew something had gone wrong. What he didn't know was where to look, when it happened, what had happened, or whether these reports would reveal it at all. He committed to not look for those answers until after our on-the-record interview about his analysis.
As an examiner, this is relatively routine stuff for an examiner to do. You have a district of credit unions, you've got maybe ten to twenty credit unions, you get an hour a quarter to go through it and analyze each one…
The NCUA system also has a red flags system… you know, loans went up this much or this ratio's out of balance and you have to disposition it. Usually by reaching out to the credit union or, if you could explain it from the financial reports, you could just do it that way.
Joshua wrote up his findings before we spoke, year by year, and sent them to me. Those will be posted on this show's website, OverdrawnPodcast.com. We went through them together live.
He told me the thing he had going for him was also the same thing he had going against him.
I'm walking into this institution cold, and so from a lookback, knowing something potentially happened, that gives me an advantage, because number 1, I'm not familiar with the credit union at all, and so I'm not used to walking in and seeing the smiles, partaking in the donuts, whatever's going on in the institution. I don't have that warmness, that familiarity. So I can strictly just look at the numbers as they're presented.
On September 28, 2026, Leigh Bridges, the former CEO of Jackson Area Federal Credit Union, pleaded guilty to three federal counts in connection with an embezzlement scheme of more than $69 million.
The Blind Read
We start off in 2016.
2016
They were above the regulatory cushion to be considered okay, but they had a lot of loans that looked like they potentially weren't paying.
712 is running at a net loss. Nothing alarming, just not much cushion.
2017
So moving into 2017, I now have a base threshold that I can start to trend against, because I was totally unfamiliar with this institution. Net worth ratio declined, which meant that cushion dissolved a little bit. But at an institution of this size you're gonna see fluctuations, so this still felt fine from that perspective. Delinquency declined, so we went from three percent down to two percent. But at the same time, membership growth spiked. The numbers are starting to talk to each other a little bit, because as you bring on members, your cash is gonna grow, you're gonna get more loans out, so your delinquency ratio is gonna start to dilute. Again, nothing is sticking out as abnormal here. Nothing that says, hey, this is about to fall off a cliff or anything.
712 was starting to look like a place that had found its footing. Stacey Shaw became its chief executive on the first day of that year.
2018
This was probably the lightest part of my write-up. The trends look relatively the same. But we've turned a corner. We're now posting positive net income, which is a great thing to see. Maybe this is turning a corner and they got some bad stuff off the books. But then I looked at the investment side… and this one shows negative thirty-four thousand as a posted item, which I'm not used to seeing a negative balance being posted at call report time. Probably a call report error is where my mind would initially go; they just filled out the report wrong, pulled it in the wrong line. But that is one that we would look at. So things are interesting. Nothing that makes me think there's something bad going on here. It's just a typical potential call report error.
Profitable for the first time in the period. One odd number, a negative cash balance at another financial institution, which he read as a typo. A phone call from an examiner, maybe. Not a visit.
2019
Two thousand nineteen, things start to get interesting. Still to this point have no clue if I'm right. Net worth rose, delinquency declined. Net worth is closer to 10% now, delinquency is down to 2%. So we're potentially growing out of these negative metrics that used to be there.
But this is where loan numbers start to scream off the page a little bit, at least from my perspective. Unsecured credit card loans have doubled over the past twelve months, and so as I'm going through this, my thought is this could either be they ran a promotion, they went out and got new members to use credit cards, or this could just be increased utilization. On the financial performance report you can actually see what's existing out there as unused lines.
So I went looked and it it was actually a mixture of both. So they they brought in… opened up new loans and then there was also increased utilization. So about a hundred and fifty thousand in just increased utilization on on these existing credit cards.
Why all of a sudden did this small local credit union spike up like this?
Then he found a second thing, which was an absence.
And then as I'm going through the pages, I noticed, well, they used to have a corporate credit union line of credit, and now that's no longer being reported, so what happened there? Is this another call report error? That's where my mind initially goes, they just forgot to put that line in. Or did something happen where the corporate credit union said, we're done doing business with you. You've overdrawn it too much, there's not the collateral to secure this line of credit.
A corporate credit union isn't a credit union for people. It's a credit union for credit unions, providing services and lines of credit to smaller institutions like 712.
That's another anomaly. So we're two years in a row with interesting anomalies that I haven't seen before.
Credit card balances doubling. A line of credit that had stopped appearing on the form. I asked him what a working examiner does with all of that.
Still at this point nothing sticks out as, oh no, we need to rush in there. This is a scoping item for the next exam, which they'd probably be on a 12-month exam. The typical thought is not much can happen in twelve months. But you never know.
And the automatic red flags that he mentioned earlier. Would any of them have gone up here?
I would think when you see fifteen percent growth… we typically see five to ten percent. This one's at fifteen. I would like to th… if nothing happened here, I would think the system should have flagged it and would've been looked at. But this, this would appear to be something that definitely have… the system should have red flagged for sure. That's really high growth.
2020
We got massive movement in 2020. As soon as you open up you go, some numbers moved, which made me think auditors or examiners potentially had been into the credit union. Almost all the ratios are now negative.
The first number I'm gonna look at is the allowance. You'd reserve for potentially bad loans in the allowance. I went and looked at charge offs. No charge offs have taken place. So we couldn't really tell which loans were thought to be bad. But my mind says, well, perhaps some of these unsecured credit card loans were never there to begin with.
Through March 2020 the unsecured loans had grown to $2.44 million. Over the course of two years that unsecured portfolio grew about 400%.
This tells me somebody already made the phone call. I've never seen movement like this that a credit union does on their own.
I asked him what he'd concluded, before I told him anything.
Examiners have a process that they go through. And there's this normal process that they go through, but they're not on site to catch fraud. It just sometimes happens to pop up when they're going through these normal processes. It's unusual to catch a lending… fictitious loans, or whatever, off site. You can see the growth, which will make you look at it more, but it would be… you can't see the loan documentation. So you don't really know. You just assume, 'wow, something really spurred this growth; we'll take a look at it next time that we're in there.' Typically it's a needle in a haystack type thing, from a 'yeah, we're actually gonna find real fraud when we go in here'.
The main flaw in something like this, on the examination side and also on the audit side (but it's just function of examination and audit process) is the period of testing. So typically it'll be a 12-month lookback, or a lookback to whenever the last exam or audit was done. If you missed something in that previous twelve to eighteen month cycle, that loan's now on the books. If something's going on, it just needs to keep performing so that it never rises to the surface.
So that is… it's not a flaw in the system. It's just a part of the system that exists. So you get one shot at finding it, unless something goes bad.
That describes one way a scheme like Shaw's could remain hidden in the financial reports, from a man who still did not know what happened at 712.
Anything to add or change, I asked him, before I tell you?
No, I don't think so. Going through the financial reports, this is what it's telling me. There wasn't a lot of funds spread out in a lot of different areas. So if something happened, there's only a couple of areas that it could have been in. A lot of ratios seemed normal. That lending one seemed odd. So no, Andy, that's my final answer.
The Reveal and the Records
All right, well, so here's the rest of the story, as Paul Harvey said.
I told him everything you've heard about this crime in the three previous episodes.
I'm interviewing Josh remotely. We both can see each other on video. I'd scripted out this reveal so I could just read it while watching his reactions in real time. He knew this was an element of the interview.
For most of the reveal, his expressions cycle between deep thought, leaning forward in curiosity, and back as he hears about the liquidation.
Once I'm done, he pauses nearly four full seconds before responding.
Huh.
So that's, I haven't heard that before. I'm curious… had the board approved it, if NCUA would've had an issue with that because it was board approved.
That's interesting. So they got her on, it wasn't fictitious loans. She was unauthorized to modify her own agreements.
Andy JanningCorrect.
I asked what he saw differently now.
I don't think it changes anything. There are tools that an examiner can use. Are you gonna use them at a credit union of this size? I don't know. But you definitely have the liberty to review employee accounts, especially when oversight is minimal or non-existent. You'd wanna take a look at those. Especially if they're getting loans, those need to be signed off on.
I've seen a lot of fraud in my time. From a scheme, this is new to me. If you had to give me fifty guesses that the manager CEO had modified her required payments down to fifty cents, I would have never got that.
I'm curious how it was caught.
I told him that, according to Lee Karl, who prosecuted the case and from whom you heard in episode 2, it was caught during an audit. According to Karl, NCUA wanted to interview Shaw and have her bring documents, but she never returned to work. That was the end of February 2020. Federal investigators were alerted soon afterwards.
This is fascinating. I'm gonna look forward to this entire podcast episode because this is fascinating. I've never heard of a scheme like this that got this big.
Based on what an examiner could actually have known at the time, was this reasonably detectable?
I think reasonably is, from an off site review, you would have seen the growth. You would have detected the growth. That's tough to get away from. Finding what the actual loans are, the fact that they were isolated to one of three employees at the institution, I think that should have been detected on site. Reviewing insider loans, especially at a place that size, should be reviewed. Account activity should be reviewed. You would see fifty cents going to these loan payments to these six different loans, just by doing a quick account scan, assuming she was using the credit union as her checking account. I think reasonably, is tough because every examiner operates differently. From a trending perspective, a hundred percent you would have seen the growth. I think a majority of examiners would have narrowed in on the insider things, which it looks like potentially took them a little bit. But eventually they did.
After Herman and I spoke, NCUA released records to me from its Office of Inspector General, an independent office that audits, investigates, and reviews NCUA programs and operations to promote efficiency and detect fraud, waste, and abuse. It looked into 712's failure. Among its findings:
On the growth, NCUA's Eastern Region had written its own summary of the case, and it said 712's credit card portfolio doubled every year from 2016 to 2019. An auditor in the Inspector General's office read that line and emailed the region to ask whether examiners are required to review credit card growth. The region answered the next day.
In the copy of the document that NCUA released to me, that answer was redacted, citing Exemption 8, the provision in the Freedom of Information Act that protects financial institution examination reports from public release.
Regarding what an examiner could find on site, the Inspector General's notes say "the examiner did identify that there was something unusual with the credit card, but looked at the accounts instead of the dollar amount. The examiner tried to obtain credit card records but the CU manager delayed providing the documents."
There will be much more to say about the examination process of 712 in episode 7, the second-to-last entry of this season. I'll admit that, as described, that topic sounds like a cure for insomnia. It isn't, because it has arguably the most significant revelation of this entire season. It's the one I've spent probably the most time analyzing, and it changed what I thought this story was about.
But there's one more fact to consider before this episode ends, this deep dive into a former NCUA examiner sharing what he would have seen, from the outside looking in: what should those inside of 712, specifically the board of directors tasked with overseeing the credit union, have seen?
The Board
They were, after all, required to meet once a month to discuss their institution's financial performance. Shouldn't they have caught the embezzlement long before anyone else? Helen Marinkovic, the CEO of West Penn P&P, the credit union that absorbed 712 after the liquidation, put that question directly to 712's board.
First of all, I asked that same question to their board of directors and I said, "How did you not notice that Visa went from $69,000 balance to two million some dollar balance? How did you not notice that?" And one of the board of directors told me, "Well, we asked her and I said, well, what was her reply, that the shell plant people were coming in asking for a visa?" And I said, "And you believe that?" So they said, "Yes." And I said, 'that's your downfall.'
The Shell plant is the ethane cracker facility that Shell was building in Potter Township, a few miles from Beaver, the largest construction project in the region in a generation. Thousands of tradespeople, including union electricians with the IBEW, came through Beaver County to build it.
I have the list of who was on 712's board of directors. NCUA sent the names in response to another Freedom of Information Act request I filed that asked for every person the credit union reported as a director, a supervisory committee member, or its manager and CEO, every quarter from the spring of 2016 to the liquidation in the spring of 2020.
Across all seventeen quarters, the board chair, the vice chair, and the Board Treasurer never changed.
The Treasurer was the board's financial officer. Under 712's bylaws in effect during this period, that office carried responsibilities involving the credit union's assets, records, and monthly financial statements. Some or all of those functions could be assigned to management. What could not be delegated was the board's ultimate responsibility for the credit union's direction and control.
The woman that 712 listed as its treasurer was born Betty Ann Giulio in Montana in March of 1927. She grew up in a mining town called Comet, fitting because Betty Ann ran track fast enough in school to think about competing in the Olympics before World War II took that chance away.
In 1946, at the age of 19, Betty Ann met her husband, moved to western Pennsylvania with him, and stayed there the rest of her life.
Betty Ann's husband was a young electrical worker named Russell Bowser. In 1964 he was one of seven charter members of IBEW Local Union 712 Federal Credit Union, and he became its first manager.
By 1986, Beaver County land records show Betty Ann Bowser signing documents listing her as the 712 credit union's manager and CEO, succeeding the 712 leadership role first occupied by her husband Russell. According to documents obtained from the Office of the Inspector General of the NCUA, she assumed that role after Russell's death.
When Betty Ann passed the manager and CEO job to her daughter Jill, Betty Ann stayed on at 712 as Board Treasurer.
She was listed as Board Treasurer when Jill passed the job to her daughter Stacey in 2017.
And when 712 was liquidated, according to the NCUA, Betty Ann Bowser was still the credit union's Board Treasurer at the age of 93.
The same Inspector General records have additional descriptions for her. The examination notes say she was active in collections, but no further explanation of that role or responsibility is included in those notes. They also call her an emeritus board member, without making clear where that description came from or when it began. In NCUA's model bylaws, a director emeritus is a former director who advises the board but is no longer a member or officer of it, and cannot vote. Betty Ann's title on NCUA's own quarterly lists of the credit union's officials never changed. In every list the agency released to me, from June 2012 through March 2020, she is listed as Board Treasurer.
Four members of the same family held 712's top management job from its founding in 1964 until its collapse in 2020, and one sat on its board of directors.
How is that possible?
In a 1996 legal opinion, which the NCUA's website still lists as current, the agency said neither the Federal Credit Union Act nor the agency's own regulations required a federal credit union to have a nepotism policy. A credit union might want to consider one, the agency wrote, as a matter of safety and soundness and internal control.
With that opinion, the NCUA enclosed an earlier letter describing model bylaw language a credit union could adopt: no director or committee member, and no immediate family member of one, could be a paid employee.
At West Penn, Helen Marinkovic says a rule like that is in their bylaws.
No family member of mine can work at the credit union. No family member of a board of director can be on the board of directors or work for the credit union.
The standard bylaws the NCUA wrote for federal credit unions left that decision to each board. The bylaw records the NCUA released to me don't show 712 adopting a restriction like that, and the most recent amendment in that file is dated February 25, 1981. Those records can't rule out a restriction recorded somewhere else.
To be very clear, nothing about the family arrangement itself is evidence that anyone on 712's board knew what Stacey Shaw was doing with the credit card accounts she opened.
The FBI said the board had no access to the credit union's databases. And as a reminder, the prosecutor stated explicitly in episode 2 that Shaw was in complete control. She was the only person charged.
I think board education is key. I think when you have family involved, that should raise things… raise the the intensity of the scrutiny.
One of the cases I was in, the manager [and] CEO, her dad laid the cornerstone in the building that we were shutting down. And it's very emotional. Very, very emotional. But that should raise the intensity of the scrutiny. Not get comfortable that we know everybody here, everything's okay. Whoops, that's a mistake.
There should not be a comfort level because of that. Founding family of a credit union, which feels odd to say.
In August of 2023, a little over three years after her tenure on 712's board ended when the credit union did, Betty Ann Bowser died at the age of 96.
Betty Ann's obituary recognizes her involvement in and around Beaver County, and a school track record back in Montana that was never broken.
It does not mention the 712 labor union or the 712 credit union.
Looking Ahead
With four episodes left in this season, here's a preview of where we're going. First, into the woods, to a property on Paradise Road and a neighbor who dealt with Stacey Shaw one on one after 712's failure.
We'll hear from an anonymous source with direct knowledge of 712's operations who is speaking to the media for the first time, but cannot risk their actual voice being heard.
We'll return to the riddle of "how did this go on for so long", to arguably the most significant discovery of this entire case, and the difficult questions it raises.
And we'll end where we started, on Main Street in Beaver, at the clock tower and its songs, the ghosts that still sing them, and one final connection that ties this story together.
Overdrawn is reported and produced by me, Andy Janning. Music by Epidemic Sound and Blue Dot Sessions. Special thanks to Sarah Cooke at The Credit Union Connection, and to Friends of the Podcast LaCorp and TwoScore.
Please rate, review, and share Overdrawn wherever you get your podcasts.
Joshua Herman's written review
Herman wrote this before our interview, working only from the call reports and Financial Performance Reports, and without knowing how the credit union failed. It is reproduced here as he sent it.
J Herman Review
This review was conducted using 5300 Call Reports and Financial Performance Reports (FPRs) received from Andy Jenning [sic]. No additional information was gathered or researched. The annual review takes place from March to March and is materially unedited after the next year was started. Entering this review, I know that something happened, but am unaware what happened and if it was fraud.
The purpose of the exercise was to review each report and determine if any red flags stood out that a normal examiner offsite review should've flagged.
For context, NCUA offsite reviews take place four times each year, rather quickly after each 5300 Call Report is uploaded. The examiner system automatically flags certain metrics, which examiners have to disposition.
2016
We're starting at a capital ratio at 9.70%, with a relatively high loss coverage ratio of 24%. This is to be expected with the above average delinquency at 3.17%. They do have a mortgage on the books, although I can't verify if it's just one. Call Report shows 7 other real estate loans/lines of credit, no first mortgages. Cash ratio is somewhat in line with peer at 39%. Reporting around 1,500 members. Running at a net loss. Nothing alarming outside of normal operational issues. With that being said, there isn't a lot of room for a $7 million credit union to absorb too many losses.
2017
The net worth ratio declined to 8.94%. Still above the regulatory threshold, but not much cushion for a small credit union. Delinquency declined to 2.12%. Membership growth spiked, we're showing positive net income, and cash increased. The cash/short-term investment ratio is now significantly above peers at 47%. Deposits in banks is at $1.24 million with just over $1 million in credit unions, probably CDs. It's a small portfolio and we'd vouch to statements. Membership is 1,592. Nothing alarming here.
2018
Net worth increased to 9.52%. Every growth ratio increased by double digits, with the exception of membership which declined. We're now posting positive net income and showing a negative cash balance of -$34,000 at cash on deposit in other financial institutions. Other than one metric, things still appear normal.
2019
Net worth is at 9.94%, delinquency is at 2.03%, and every growth metric is up, while our cash/short-term investment position slightly declined. That ratio measures as a comparison of assets, so this isn't unexpected. Unsecured credit card loans have doubled over the last 12 months. Perhaps new loans or perhaps increased utilization. Confirmed it's a mixture of both. About $150,000 in increased utilization. We've gone from a $7 million credit union to an $8 million credit union in 12 months, a rapid 15% growth. Shares grew roughly $800,000. I'd want to look at the share growth – new memberships, funding. Everything continues to look somewhat normal aside from the unsecured credit card growth and large increase in shares. Corporate credit union line of credit capacity disappeared at year end 2018. Could be a call report error or could be an issue between the credit union and the corporate. Membership grew by about 250, so we're at 1,728. The growth compared to deposit growth is reasonable. At this point, there's some anomalies we'd want to look at closely. Nothing sticks out as fraud, but the risk profile has changed.
2020
Something happened here as almost all ratios are negative. Assuming examiners saw something and forced some movement, but we can still use the numbers. Based on the huge increase in the allowance, it appears we had some issues with loans. No charge offs have taken place, so we can't tell which loans were bad. If I had to guess, the optimistic side is the discovery of many loans weren't paying and need to be charged off.
The pessimistic, and perhaps realistic side, is the unsecured loans were potentially fictitious. Through March 2020, the unsecured loans had continued to grow and increased from $1.15 million to $2.44 million. We picked up on the unusual growth in the previous review. Over the course of two years, the unsecured portfolio grew just under $2 million, or 400% growth.
Next Steps
Sampling new loans is always an examination step, along with varying the loan type in the sample. We would've been sampling new and troubled loans all along. We would've been sampling new membership accounts all along. But the depth of the onsite review makes a difference. As a loan review isn't designed to detect fraud, there are clear gaps in the review procedures and methodology. The main flaw is around the testing period, which is typical for audits as well. Loan samples are generally pulled from the exam period, unless the loans are troubled. That really only gives one chance to catch the bad loans from a somewhat random sample.
This doesn't mean it just goes undetected forever. If this was fraud, there are various ways this could've been uncovered.
- Payments – Where are the payments on the loans coming from? Payments get logged into the system, and it wouldn't be difficult to see if the payments were all flowing from the same or adjacent account. The same would apply if new loans were making payments on older loans to pay down the lines.
- Loan Committee – Many credit unions at this size have a loan committee that has to approve all loans. One missed sign off can trigger a domino effect.
- Loan Docs – Unsecured credit card loans are notoriously light on underwriting, with much of it just being a signature. Perhaps the credit union knew this. However, signatures can look the same, especially when other things aren't adding up.
- Supervisory Committee Audit – While rare, it's possible the audit raised red flags around loan committee sign offs or noticed something else. Or the audit could've been nonexistent as well.
- Board Minutes/Reporting – Was the Board notified of all new members?
Any discrepancy during an onsite review should cause an examiner to focus and dig deeper.
Conclusion
It's unusual to catch something like from an offsite review, especially early. The growth was a red flag, but that took time to establish. Looking back, in March 2016, the average loan balance was $5,064. By March 2020, this number more than doubled to $10,343, with the biggest growth being in the unsecured categories. But even this was a gradual climb. The trends will eventually appear and warrant an onsite review, but loan review is already a requirement of every exam. It's typically a needle in a haystack. However, reserving for half the entire loan portfolio hints that at some point this wasn't a needle in a haystack. It appears more like half the hay wasn't real.
Where this episode's facts come from
Every factual claim in this episode traces to a document or an on-record interview. Public records and published coverage are linked below. Records released under the Freedom of Information Act are identified by request number.
The examiner's analysis
- Joshua Herman's written analysis of 712's financial reports Prepared for Overdrawn before his interview, 2026 His year-by-year review of the credit union's call reports and Financial Performance Reports, March 2016 through March 2020, written without knowing how the credit union failed. The full text appears on this page.
NCUA records
- Call Reports (Form 5300) and Financial Performance Reports, IBEW Local Union 712 FCU, Charter 16119 NCUA, March 2016 through March 2020 Unsecured credit card loans were $536,635 in March 2018, $1,151,054 in March 2019 and $2,436,726 in March 2020.
- Credit union officials reported to the NCUA, by quarter FOIA requests 2026-FOI-189 (June 2012 through December 2015) and 2026-FOI-176 (March 2016 through March 2020) Across all seventeen quarters from March 2016 to March 2020, the same chair, vice chair and Board Treasurer. Betty Bowser is listed as Board Treasurer in every quarter from June 2012 through March 2020.
- Charter and bylaw records FOIA request 2026-FOI-146
- Records of the Office of Inspector General's review of the credit union's failure NCUA Office of Inspector General, FOIA request 2026-IGF-00016 Includes the examination notes quoted in Parts three and four. The Eastern Region's answer about credit card growth was withheld under Exemption 8.
- Hiring of Relatives NCUA Office of General Counsel, legal opinion 96-1024, 1996 No federal requirement for a nepotism policy; a credit union "may wish to consider adopting" one as a matter of safety and soundness and internal control.
- Nepotism in Credit Unions NCUA Office of General Counsel, June 4, 1991 The earlier letter enclosed with the 1996 opinion, on the standard bylaw amendment against nepotism.
- Federal Credit Union Bylaws 12 C.F.R. Part 701, Appendix A The model bylaws, including the director emeritus role, which advises the board but cannot vote.
- Office of Inspector General NCUA
Other records
- Instruments signed by Betty Ann Bowser for the credit union Beaver County Recorder of Deeds
- Obituary of Betty Ann Bowser Beaver County Times, August 2023
Coverage
- CEO's Theft Leads to Closure of Credit Union FBI, February 17, 2022 States that Shaw was one of only three employees and that the board had no access to the databases.
The Jackson Area Federal Credit Union case
- Former Jackson credit union CEO charged in multimillion-dollar embezzlement scheme WLBT, September 28, 2026
- Former JAFCU head pleads guilty to three federal counts WLBT, September 28, 2026
and questions
Tell me if something here is wrong.
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