WATERBURY, Conn. – Federal law enforcement officials have arrested a second executive of a New York-based company in an alleged embezzlement scheme that authorities say defrauded Webster Financial Corp. out of more than $12 million.
Bernard McGarry, chief operating officer of Mount Vernon Money Center in Mt. Vernon, N.Y., was charged with helping to steal $50 million from Webster Bank, other financial institutions, retailers, hospitals and universities.
Both McGarry and Mount Vernon Money Center President Robert Egan were indicted earlier this month in the scheme. Egan had been arrested last month.
Waterbury, Conn.-based Webster Financial Corp. says it will be forced to a take an $11 million charge against its earnings in the first quarter.
The company had been hired by Webster to replenish cash in some of its 460 ATMs. But authorities allege the company failed on several occasions in January to return to Webster money that had been left in the 162 ATMs Mount Vernon had overseen.
It was not immediately clear where the affected ATMs were located. Webster’s subsidiary, Webster Bank, is the ninth-largest bank in Rhode Island by deposits.
On Feb. 2, Webster announced that it had detected and halted the embezzlement scheme.
The bank said in a recent U.S. Securities and Exchange Commission filing that Mount Vernon Money Center, which has since been placed in receivership, had maintained insurance coverage in excess of Webster’s losses.
The insurance claim is not expected to be settled by the end of the first quarter, “and there can be no assurance of recovery,” Webster said in its filing. “Therefore, Webster will take an $11 million charge to earnings associated with this event in the first calendar quarter of 2010, and will continue to pursue every avenue for recovery.”
Egan and McGarry each have been charged with one count of conspiracy to commit bank fraud and wire fraud and six counts of bank fraud. If convicted, they face a maximum penalty of 30 years in prison and a maximum fine of $1 million or twice the gain or loss resulting from the crime for each of the counts.
Mount Vernon owned a subsidiary called Armored Money Services, which provided armored car services to banks and other companies. Mount Vernon also provided payroll services to other organizations, including hospitals and universities.
In a news release, federal authorities alleged Egan and McGarry used the stolen money to cover “tens of millions of dollars in operating losses … and to enrich themselves.”
Webster Financial Corp. (NYSE: WBS) – a $17.8 billion company based in Waterbury, Conn. – is the holding company for Webster Bank N.A., a financial services company with more than 181 branches, including 13 branches in Rhode Island. Additional information is available at www.WebsterOnline.com.
