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Global hacking attack raises security concerns

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NEW YORK and HERNDON, Va. (2/19/10)--During the past 18 months nearly 75,000 computers at about 2,500 companies and government agencies have been hacked in what computer security experts say is a coordinated global attack (The Wall Street Journal Feb. 18). And the attacks are still operating. More than 374 are U.S.-based organizations, said NetWitness Corp., a Herndon, Va.-based company that uncovered the Kneber botnet attack last month (ComputerWorld Feb 18). Kneber, which began in Germany, is a variation of the Zeus botnet. It is working in tangent with another bot, the Waledac, making taking down the malicious software more difficult. Companies compromised in the U.S. include Fortune 500 companies; local, state and federal government agencies; Internet service providers, and educational institutions. The Wall Street Journal named pharmaceutical company Merck & Co., Cardinal Health Inc., Paramount Pictures, and software company Juniper Networks Inc. as among the companies with compromised computers. It is not known if credit unions are directly involved, but data stolen include banking information such as login credentials mainly for financial accounts, credit-card transactions and intellectual property. However, NetWitness Corp. told Computerworld the bot also appears to be harvesting other kinds of information that suggest Zeus is being put to broader uses than just stealing bank credentials. The Wall Street Journal reported that in more than 100 instances, hackers gained access to corporate servers storing large quantities of business data such as company files, databases and e-mails. Computers of at least 10 government agencies were accessed. For some companies, enterprise systems were compromised as a result of "drive-by downloads," while others were targets of "spear phishing" campaigns designed to get individuals to open up e-mails with malicious links and attachments. More than half the machines infected are also infected with a peer-to-peer bot called Waledac, with the Kneber bot actively logging Waledac activitiy and downloading it to machines it has infected. This makes it harder to take down both bots. When one is removed, it triggers another to insert it back into the compromised system. NetWitness said that rival cyber gangs are teaming up in the cyberattacks. The news comes just after Google Inc. disclosed it and more than 20 other companies had been breached by hackers from China. The hacking affected 196 countries, with the highest concentration of infected computers in Egypt, Mexico, Saudi Arabia, Turkey and the U.S.

UW-Oshkosh moves to direct lending on student loans

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OSHKOSH, Wis. (2/19/10)--The University of Wisconsin-Oshkosh announced this week it is changing its federal student loan process by requiring students borrow from the federal government--not from banks or credit unions. The new policy will begin this summer. In a press release, the university said the move is prompted by its joining "thousands of other U.S. higher education institutions in the Federal Direct Student Loan Program." Chancellor Richard H. Wells said the university compared two student loan programs, the Federal Family Educational Loan Program and the Federal Direct Student Loan Program, before its decision. "Many banks are no longer servicing student loans or are restricting who will receive loans," he said. The program "ensures funds are available for students," he added, saying that with direct lending, funding is secure, fees and interest rates are more favorable and processing is streamlined. As a result of the change, UW-Oshkosh students with federal Stafford, Grad PLUS and Parent PLUS loans will borrow funds from the federal government instead of from multiple private banks and credit unions. Students participate in the program by filling out a Free Application for Federal Student Aid (FAFSA), signing an electronic master promissory note and participating in online entrance counseling. Changes in federal student loan processes the past three years have prompted some credit unions to get out of the student loan business. Others have joined private student loan networks to fill the gaps between federal student loans and students' needs. Two companies that have proved popular with credit unions entering the private student loan market are Fynanz Inc., which powers cuStudentLoans.org, a private lending marketplace, and Credit Union Student Choice, a credit union service organization. Fynanz currently serves 30 credit unions in its turnkey program, and Credit Union Student Choice announced its 100th credit union client this week.

Appeals court Resentence exec in embezzlement case

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MICHIGAN CITY, Mich. (2/19/10)--A credit union executive convicted of embezzling about $339,000 should be re-sentenced, according to a recent ruling by the Michigan Court of Appeals. Terry L. Brandt, 58, was convicted in September 2008 of embezzling from Michigan Center, Mich.-based Cascades CU while he was chief financial officer and treasurer of the credit union. Brandt wired money from the credit union's general account to his personal trading accounts at least nine times between October 2006 and January 2008, according to court records (News Now Sept. 5, 2008). In October 2008, Brandt was sentenced to five to 20 years in prison for the offense. However, Court of Appeals judges said his sentencing guidelines--a point system used to calculate a spectrum of possible penalties--were incorrectly calculated by the lower court judge (Jackson Citizen Patriot via Mlive.com Feb. 17). The prosecution in the original case argued that when Brandt committed the crime he abused his authority status--and he was assessed points for this, the newspaper said. The appeals court found that, as defined by law, Brandt did not abuse his authority by exploiting a victim--in this case, the credit union, the paper said. “He simply was in a position to take the money and hide the transfers,” according to the court’s written decision released in January. Jerrold Schrotenboer, chief appellate attorney for Jackson County, Mich., said he is appealing the decision, according to the paper.

100000 missing from CU in Tennessee

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CLINTON, Tenn. (2/19/10)--The Tennessee Bureau of Investigation has launched a criminal probe after Anderson County Employees FCU in Clinton, Tenn., reported that more than $100,000 was missing. The money shortage was discovered during a routine audit Jan. 19 of the $1.8 million-asset credit union, said Jim Sanderson, chairman of the credit union’s board (The Knoxville News-Sentinel Feb. 18). Between $100,000 and $200,000 is missing, Sanderson told the paper. Shirley McKinney, the credit union’s office manager, was put on supervised leave without pay the day the shortage was discovered, Sanderson added. “We have taken action to protect everybody,” Sanderson told the paper. A letter that’s being drafted for review by the credit union board soon will be sent to members notifying them about the incident, Sanderson added.

Corporate CEO Support corporates because of liquidity they provide

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HIGHTSTOWN, N.J. (2/19/10)--It is a critical time for credit unions to support corporates because of the liquidity services they provide, according to Jay Murray, president/CEO of Mid-Atlantic Corporate FCU. Murray spoke Tuesday at the Shore/South Jersey Chapter Meeting about corporate credit unions. He focused his discussion on the concept of rethinking the future of the corporate network, said the New Jersey Credit Union League (The Daily Exchange Feb. 17). Communication and collaboration between credit unions and corporates also is key, Murray said. Corporates have maintained “too much of a vendor status” with their credit unions, and it is critical now more than ever that they work together, Murray added. He also discussed the National Credit Union Administration’s proposed Regulation Part 704. Comments for the proposal are due March 9. The regulation could be a turning point that could set the course for the industry’s future, Murray said. The proposal requires that corporate directors be made up of individuals who currently hold the position of CEO, chief financial officer, or chief operating officer at their credit union. This makes it almost impossible for corporates whose smaller members do not have these titles and it limits some other very qualified people, Murray said. He cited the example of a current Mid-Atlantic board member--a former credit union CEO--who is also a CPA and attorney. Under the new regulation, the board member would not be eligible to serve. Murray also discussed board governance, criticizing the regulation’s six-year turnover for those serving on the board. Six years is too short for a board member to make any progress. A balance between the proposed limitations and current freedoms so corporates can keep daily operations efficient and effective also is important, he added. Regulation 704 has good intentions, but is attempting to put a stop to what has already happened, “closing the barn door after the horse has ran out,” Murray said. To solve this economic and credit crisis, he said, capital needs to be restored and preserved now. “We’re not where we need to be, but we’re getting there,” Murray concluded.

CORRECTION W. Va. Corporate meets today to discuss losses

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PARKERSBURG, W. Va. (2/19/10)--(News Now's original story had several errors. This story is the corrected version. News Now regrets the errors.) West Virginia Corporate CU will have a special informational membership meeting today in Charleston, W.Va., to discuss the National Credit Union Administration’s proposal for a rewrite of regulations for corporate credit unions and to provide an update on the corporate’s capital position. The meeting will be led by Board Chair Tom Brewer and CEO Charles Thomas, according to the corporate’s website. The corporate has released its unaudited financials as of Dec. 31, indicating a $10 million loss for 2009, compared with a $2.3 million loss in 2008. The corporate experienced a $11.3 million loss in capital held in U.S. Central FCU, with $1.1 million of U.S. Central member capital shares still on its balance sheet in December. All of its U.S. Central paid-in-capital was depleted. Net income for December was $22,000 compared with a loss of $2.9 million the year before. West Virginia Corporate CU, based in Parkersburg, W.Va., has $245 million in assets.

CU System briefs (02/18/2010)

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* MARLBOROUGH, Mass. (2/19/10)--The Massachusetts Credit Union League Social Responsibility Committee will conduct its 10th Annual Children's Book Drive in April, said the league (E-Weekly Feb. 17). Last year, the league and 41 credit unions participating in the month-long event collected 19,211 children's books for nonprofit agencies throughout the state. They have collected 190,300 books since the project began. Credit unions participating can choose their collection method for new and used books and the length of time they will collect ... * HERNDON, Va. (2/19/10)--The Northwest FCU Foundation has been selected as a participating organization in "Disney's Give a Day. Get a Disney Day" promotion. The promotion began Jan. 1 and will run through Dec. 15 or until the limited number of tickets are gone, whichever comes first. Hoping to inspire one million people to volunteer, the Disney Company is giving individuals who commit to participate in their community a free one-day admission to either Disneyland, or Walt Disney World Resort. Gerrianne Burks, foundation chairman and president/CEO of Northwest FCU, noted. "By participating as a community partner, we hope to also inspire people to give back and practice acts of kindness" ... * SAN DIEGO (2/19/10)--Staff from San Diego-based Point Loma CU (PLCU) will discuss its college scholarship program and answer questions from viewers during a Scholarship Bank broadcast on Spanish language Univision Channel 34. The broadcast will air 6 p.m. to 7 p.m. Wednesday. PLCU Business Development Managers Joyce Parra and Adriana Brunner will outline the program and explain the application process. Each year, the credit union awards $7,500 in scholarships to local high school students headed for college. Recipients can receive an additional $1,000 per year for their sophomore, junior and senior years as long as they meet certain academic requirements. The credit union was invited to participate in the broadcast because of its relationship with San Diego County Office of Education's Migrant Education Program, which helps migrants improve their lives and finances ... * HARRISBURG, Pa. (2/19/10)--Ed Cialella, longtime board president of First Choice FCU, New Castle, Pa., and former president of the Shenango Valley Chapter of Credit Unions, died Monday, according to the Pennsylvania Credit Union Association (Life is a Highway Feb. 18). He was 82. Cialella was a credit union volunteer more than 35 years. "He was the cornerstone of First Choice FCU," Marilyn Wehr, CEO, told the association. Funeral services were held Thursday ...

Rhea appointed to Georgia Centrals board

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DULUTH, Ga. (2/19/10)--Georgia Central CU’s Board of Directors appointed John Rhea, CEO of Robins FCU in Warner Robins, Ga., to serve as a director. Rhea will complete the unexpired term of Charm McCall, formerly of CSRA CU, which merged with Associated CU late last year. Georgia Central CU is a corporate credit union based in Duluth, Ga. “He has more than 30 years of experience in the financial industry, with 14 of those years spent enriching Georgia credit unions,” said the corporate Chairman Lin Hodges, CEO of Associated CU, Norcross, Ga. Rhea began his credit union career at Robins FCU in 1996 as vice president of operations. After a brief hiatus during which he served at another Georgia credit union, Rhea returned to Robins FCU in 2006 to become the executive vice president/chief operating officer. He stepped into the CEO role just a few years later. Rhea currently serves as a board member of Cooperative Services Inc. and sits on the Georgia Credit Union Affiliates’ Finance Task Force. He also is a past president of the Middle Georgia Credit Union Chapter.

Tempers flare as Canadian CU strike delays service

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NELSON, B.C. (2/19/10)--Long service delays at a Canadian credit union that reduced its hours after about 50 staffers went on strike produced hot tempers and a broken glass door Wednesday. Angry about the long delay in getting his check cashed, an unidentified man kicked and smashed the glass in the front door at Nelson, B.C.-based branch of Nelson and District Credit Union (The Canadian Press Feb. 17). Another man yelled at staff placing tape to seal off the broken door until it could be repaired. The striking workers, represented by United Steelworkers Union, went on strike at the Nelson, Rossland and Crawford Bay branches. CEO Doug Stoddart told the publication that the credit union is trying to keep the branches open with management staff. The striking workers have been without a contract since May 2008. Stoddart said another offer is on the table and the credit union hopes to resolve the situation "in due course."