UARK Credit Union Rebounds After CEO Turmoil During 2001

It was an unusual valentine.

On Feb. 14, 2001, the UARK Federal Credit Union in Fayetteville received a letter by accident. It was addressed to the credit union but the post office box was wrong.

When the credit union staff opened the letter, they realized Dean Mangum, the former president of UARK, had been receiving payments for selling jumbo certificates. And the payments were being sent to an unknown post office box.

“The day Sarah [McCue] and I figured this out, we called the FBI, the National Credit Union Administration and our director,” said Gina Williams, who was then operations manager of UARK and is now interim CEO.

“Forget Valentine’s supper. We had to figure out what was going on … He had been running the money-laundering scheme since 1997, so there were mega amounts of records.”

Mangum had been fired from the credit union in January 2001 after Williams and UARK employees McCue and Laura Axt went before the board with proof that he had been “self dealing.” The three women said Mangum had been making bad loans to a car dealership in Little Rock in which he was part owner.

That was enough to get Mangum fired, but they had no idea he was laundering money through the credit union until they received the letter. At about the same time, telephone calls started coming in, and it became clear why some of the numbers hadn’t jibed with what examiners found in the books.

Mangum, who had been CEO of the credit union since 1995, had sold 27 jumbo certificates totaling $2.7 million to banks and credit unions around the country. Jumbo certificates are for either $99,000 or $100,000 each. Mangum used his home telephone number and e-mail address as well as stationery with a fake letterhead and his own post office box.

In January 2002, Mangum pleaded guilty to eight counts of money laundering, one count of filing a false income tax return and two counts of criminal forfeiture. He was sentenced to imprisonment for 70 months followed by supervised release for a period of three years and ordered to pay $3 million in restitution, which Mangum apparently didn’t have. On July 8, 2002, he began serving his sentence in federal prison in Texarkana.

“I considered him a friend,” said Mike Davis, who was on the UARK board at the time of Mangum’s arrest and is now chairman of the board. “I considered him trustworthy. I felt he had not only betrayed his position in the credit union but he also betrayed the trust the board put in him. I felt that it was a personal attack. It was like finding out someone you had grown up with is suddenly a serial killer.”

“He seemed like a model dad,” Williams said of Mangum. “Jekyll and Hyde, definitely.”

Davis said the credit union received $2 million from the Credit Union Mutual Insurance Co., $380,000 from the sale of Mangum’s 3,400-SF, five-bedroom house in Fayetteville and 1999 Chevrolet Suburban and $370,000 from Mangum’s frozen bank account at the Bank of Arkansas. So there was a minimal loss to UARK after the dust had cleared, he said.

“At no point was anyone’s funds at risk in the previous situation,” Davis said, referring to the more than 11,000 people who had money invested with UARK.

A Sense of Duty

The three women who blew the whistle on Mangum for self dealing were all in their 20s. Their boss was in his mid-40s at the time. McCue is currently operations manager at UARK. Axt has since left the credit union.

“When you’ve got the information in black and white, and you can look at it and trace it, there was no doubt,” Davis said, recalling the board meeting where the three women presented their evidence.

The board called Mangum in a few days later and questioned him.

“He did a song and dance around everything,” Davis said. “It was all very vague.”

“It took some doing to go into a board meeting with nine directors [and] telling on him for self dealing,” Williams said. “That was kind of hard. They might not believe us.”

But they did, and the board fired Mangum.

“They were placing themselves at risk,” Davis said of Williams, McCue and Axt. “I applaud their courage. They did what they thought was right. That told me I could honestly trust these ladies.”

“To me, bravery wasn’t a question,” Williams said. “It was a duty to our people, our investors … We’re not going to let one man’s greed destroy that. We’re too spiteful for that.”

The National Credit Union Administration, which insures credit unions much like the FDIC insures banks, sent in two interim CEOs, first Marty Parsons, then Alan Rhoades. Since September 2002, Williams has been serving as interim CEO. She plans to stay in that position until the end of the year and perhaps longer if the board will let her.

Since January 2001, the credit union’s assets have increased from $34.4 million to $36.1 million. That increase occurred during a downturn in the national economy.

“We are going forward,” said Davis, who is director of pulmonary rehabilitation at HealthSouth in Fayetteville. “We’ve done a tremendous amount of this. We’ve added a lot of programs.”

“We are a well-capitalized financial institution,” Williams said.

Davis said UARK, which was founded in Fayetteville in 1965, offers more services than most credit unions of a similar size. UARK offers mortgage, personal and car loans, as well as credit cards, Internet banking, electronic bill paying and Visa check cards. The credit union also doesn’t charge for ATM withdrawals.

“We try to give as much money back as possible, rather than putting money in the shareholders’ pockets,” Davis said, referring to the the fact that credit unions are nonprofit.

“Nobody stands to get rich off of our profits,” Williams said. “Only the members benefit.”

“You’ve got people who are here because they want to help,” Davis said. “These are all people who have volunteered their time to help because they believe people should give back to the community. If people don’t give back to the community, the community can’t prosper.”

In addition to Davis, the UARK board includes Dan Ferritor, Tom Rufer, Susan Stephenson, Adam Motherwell, Randy Allen and Stephen Davis.

UARK now has about 11,200 members. The credit union serves the University of Arkansas’ Fayetteville campus through its main location in that city. UARK has two branches in Little Rock, one that serves the University of Arkansas at Little Rock and another for the University of Arkansas for Medical Sciences. Other clients include Northwest Medical Center in Springdale and the cities of Fayetteville, Springdale and Siloam Springs.

Credit Union Passion

Williams grew up in Crosses, a small town in southwest Madison County. She is the niece of Alta Faubus of Huntsville, who was married to former Gov. Orval Faubus until the two divorced in 1969. Alta Faubus was also publisher of the Madison County Record in Huntsville.

Williams, 29, went to work for the UARK Federal Credit Union right after high school graduation. She planned to take classes at the UA full time but never got around to it.

“I loved the job immediately so much I became passionate about the credit union movement nationwide,” Williams said. “I didn’t want to go back to college full time because I loved the work.”

At the age of 18, Williams began working as a teller at UARK. She rose through the ranks, becoming a new accounts representative, teller supervisor, operations manager/accountant, vice president and finally interim CEO.

“I love it,” Williams said. “I can’t see doing anything but credit unions.”

“I watched this young lady go from a young starry-eyed teenager to a very competent and capable executive,” Davis said of Williams. “If you could clone this young lady, I would clone her and go out to sell her to other financial institutions, and I would retire … Her level of integrity and commitment is without question.”

It’s that kind of integrity and commitment that prompted the Northwest Arkansas Business Journal to choose Williams as one of this year’s 40 Under 40 honorees.

Williams and Davis obviously have strong feelings about credit unions and the ability those institutions have to help others.

“The whole credit union movement is to serve the underserved,” Williams said.

“We allow people to achieve their dreams, not only for themselves but for their children and grandchildren,” Davis said. “I’m one of these eternal optimists. I believe there’s good in everybody, and if you look for it, it will come out.”

Williams and Davis talk a lot about the democracy of credit unions.

According to UARK’s Web site, “A credit union is owned by the members who hold accounts there. An annual election is held to allow the membership to elect a board of directors. The board of directors are strictly volunteer and are not paid for their time.

The board’s responsibilities include setting policies, and making decisions on behalf of the credit union. This democratic structure gives each member a vote, regardless of the size of his or her account.”