Fugitive Awaits Fraud Trial

Source: State Journal Register
Date: November 23, 1997

Ex-Credit Union 1 official to stand trial for taking thousands

On April 19, an off-duty police officer knocked on a door at the Miami Marriott Hotel and asked the man who answered if he was Richard Eugene Binet.

The man responded, "No."

When the officer insisted on seeing identification, the man produced a Florida driver's license -- which indeed identified him as Binet, the former chairman of the board of Illinois' Credit Union 1, who was wanted on a federal arrest warrant.

Inside Binet's hotel room were "bundles of cash in bank bands in plain sight on the bed" totaling $3,000, according to federal court records. A short while later, Binet was joined by his wife, Kathryn O'Boyle Binet, 45, in the hotel security office. He asked her if she had "enough money," court documents state.

"O'Boyle responded with words to the effect that yes, she had enough money; she had 118 million," prosecutors say in the court papers.

Unbeknown to Richard Binet, who was in Miami attending courses in the Church of Scientology, a federal grand jury from the Central District of Illinois had indicted him a month earlier. The sealed indictment charged Binet with conspiracy to defraud Credit Union 1, misapplying funds of a federally insured institution, and making false statements to deceive examiners.

When the arrest warrant was issued, authorities listed Binet's address as unknown. Postal inspectors were instructed to find him.

The feds weren't the only people searching for Binet.

"We were looking for him," said Vince Toolen, president of Credit Union 1, whose membership includes 35,000 employees of the state of Illinois and tens of thousands of other people.

Credit Union 1 wanted to serve lawsuit papers that accuse Binet of causing the institution to lose $9 million of its members' money in speculative investments. The suit also blames Binet for helping to squander another $2 million on salaries, bonuses, travel, consulting contracts and cars. Today, Binet, 50, is under home confinement -- at a rented house on a rural lot near Chillicothe, north of Peoria -- even though prosecutors have alleged he used aliases and at least 15 different addresses, that he has control of large amounts of money under various names, and that he told an associate, "If they come down big, I'm gone." According to federal prosecutors, Binet's misidentification to the arresting Miami police officer was merely the last in a series of lies he has told to everyone from the IRS (which entered a $6.3 million assessment against him in 1988) to financial examiners to the credit union board itself.

Hilary Frooman, assistant U.S. attorney in charge of the case, would not answer questions last week, nor would attorneys representing Binet or Angel Lopez, 59, the former president of Credit Union 1, who is also named in the indictment. Lopez lives in Georgia.

But papers on file in federal court in Peoria, where the case is scheduled to be tried in February, add to the strange picture that already has emerged of Binet, a former Air Force officer who somehow gained control of a not-for-profit financial institution, taking its members on a risky and costly ride that eventually led to 58 percent of assets being invested in unstable and speculative "derivatives."

As a board member, Binet was required to serve without compensation. He could not, directly or indirectly, have any monetary interest in credit union business without informing the full board.

The indictment alleges that Binet and Lopez conspired between 1984 and 1990 to embezzle money through a front company, Hana Advertising Associates, and inflated contracts. The two failed to disclose to the board and regulators that they controlled the firm, prosecutors say. In 1987, Lopez and Binet signed a 54-month "consulting agreement" with Hana for $4,700 a month plus expenses, the indictment states. Monthly checks totaling $231,000 were soon flowing to Hana, including two cashier's checks for $55,000 and $65,000 after the contract had been terminated. All the Hana checks were endorsed by Binet, and the payments to Hana began 11 months before the contract was drawn up, prosecutors allege. Then, in February 1988, the board approved payments directly to Binet for time spent "handling" investments, without first drafting the terms of the contract, the indictment states. Two months later, checks that would eventually total $78,000 began flowing to Binet from the credit union. With payments to Binet and Lopez spiraling, the board voted in February 1989 to buy out Lopez's portion of his consulting contract for $580,000. But then, only two months later, the credit union entered into a new contract, which "renewed automatically for a new five-year term" at the end of each year. The only valid reason to terminate the new contract was if Lopez were "convicted of any felony offense regarding credit union business," and specifically not for "negligent . . . violations of regulatory rules or laws."

If Lopez's contract was terminated for anything besides a felony conviction, the new contract said, the credit union would have to buy him out.

But by this point, federal deposit insurance examiners already were focusing on the curious arrangements Binet and Lopez had with Credit Union 1.

During an on-site inspection, examiners for the National Credit Union Administration immediately noted that Credit Union 1 could not say where Binet lived -- his sole address was a post office box. Employees could not reach him, communicating with him only when he called in. The examiners noted the credit union's unusually high investment ratio in "collateralized mortgage obligation residuals," exotic and highly speculative investments that would eventually lead to the $9 million loss. And they noted Lopez's extremely generous contract.

While examiners never figured out the payments to Hana and Binet, they were concerned enough to meet with the credit union board. The minutes of the meeting state regulators informed Credit Union 1 there would be on-site inspections once a year "forever," the indictment states. The board agreed with NCUA to unload half of its risky investments by January 1990. However, prosecutors charge, at the bequest of Binet and Lopez, the board instead voted to switch to private deposit insurance. That meant the credit union no longer was under federal oversight.

The fiasco at Credit Union 1 came to an abrupt end only in May 1992, when officials from the Illinois Department of Financial Institutions, accompanied by an armed state police officer, arrived at Credit Union 1's headquarters in Rantoul and dismissed the entire nine-person board. Board members were told to vacate the property -- immediately. Today, Binet is on $10,000 bond until trial, which is scheduled to start Feb. 2. His travel is restricted to meeting with his attorney, and then only with prior approval of the U.S. Probation Service. He is to report daily to a probation office, and he was ordered to surrender his passport. After the federal case has concluded, Credit Union 1 plans to follow up on its civil case, Toolen said.

"Independent of us, the U.S. attorney brought action against them," Toolen said. "That action has proceeded along the way, and now it's on the front burner, so everything else is being held."

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