The former manager of the now-defunct CBS Employees Federal Credit Union has been sentenced to 14 years and one month in federal prison in connection with a two-decade embezzlement scheme that caused the cooperative to lose $40 million and forced it into insolvency.
Edward Rostohar, 62, of Studio City, admitted he had gambled away much of the money and spent the rest on private jets and expensive cars and watches. He pleaded guilty to a felony count of bank fraud May 20.
The scheme involved a series of payments Rostohar made to himself over the years using his position as a manager, some online and others via checks made payable to himself, prosecutors said.
He began embezzling in 2000, according to a sentencing memorandum his attorneys filed.
“The amounts were, at first, small,” Rostohar’s attorneys wrote. “But over time, between mounting, pathological gambling losses and failed business ideas that were supposed to make good the stolen funds, this amount ballooned to more than $25 million.
“Combined with the interest those stolen funds should have been earning, the credit union discovered in 2019 that it was approximately $40 million poorer than it believed.”
According to court documents, Rostohar was first exposed on March 6, when a credit union employee discovered a $35,000 check made payable to the manager.
The employee then conducted an audit and discovered $3.775 million in checks made payable to Rostohar between January 2018 and March. Those checks included the forged signature of another employee, who did not give consent.
Rostohar was arrested March 13, the day after he was suspended from work and his wife called police to say her husband was leaving the country, according to court documents.
The National Credit Union Administration liquidated the CBS Employees Federal Credit Union on March 29 after determining it was insolvent and had no prospect of becoming viable. University Credit Union of Westwood assumed CBS Employees’ assets, loans and all member shares.
Rostohar previously told authorities that before he started working at the CBS credit union, he had been an examiner with the National Credit Union Administration, a federal agency that regulates credit unions. He said his insider knowledge helped him escape scrutiny.
“He has the moral culpability of someone who was willing to leave as many as 43 depositors with deep losses so that he could wear $100,000 watches, buy a new vehicle every couple years and impress women less than half his age with trips on private jets to international vacation resorts, Tiffany jewelry and gambling parties,” prosecutors wrote of Rostohar in the government’s sentencing memorandum.
In addition to gambling and buying luxury items, Rostohar told authorities he wrote tens of thousands of dollars’ worth of checks to himself to cover the costs of a coffee business he started in Reno in December.
He also used the funds to pay a $5,000 monthly mortgage on a home in Reno he purchased, and to pay his wife a $5,000-a-week allowance, prosecutors said.
Rostohar has agreed to forfeit bank accounts; homes in Studio City, Reno and Mexico; four vehicles, including a Porsche, a Tesla and a Lexus; and luxury watches and jewelry, prosecutors said.
“Somewhere along the line I lost focus of what is truly important in life and I lost my soul,” he wrote in a letter submitted with his sentencing memorandum. “I missed out on so many important things because I was selfish and greedy. The best thing that happened to me was getting caught.”