The chief financial officer of the former Portland Police Department Federal Credit Union pleaded guilty Friday to a federal charge of making false entries in credit union records, after an audit of the credit union revealed the credit union’s manager had embezzled more than $400,000.

William J. Murphy, 75, of Gray filed quarterly reports from 2009 to 2013 overstating the credit union’s net worth to the National Credit Union Administration, making it appear it had enough money to continue operating when he knew it didn’t, according to a prosecution document filed with the court.

Murphy was interviewed by a federal agent in May and said he falsified the records because he knew that if the credit union’s calculations of assets to debits put its net worth ratio under 4 percent, the National Credit Union Administration would shut it down, wrote Assistant U.S. Attorney Donald Clark in the prosecution document.

“At some point, the defendant told the bank’s manager that the PPDFCU’s net worth was at 4 percent. In an effort to increase the net worth, the manager moved money out of certain members’ accounts at the end of the month and moved the money back at the beginning of the next month,” Clark wrote. “The defendant knew that he was submitting false information to the NCUA in the call reports, but was doing it to keep the PPDFCU afloat. He also knew that the call reports were submitted under oath, and said: ‘we all make mistakes.'”

The National Credit Union Administration discovered suspicious activity in November 2013 during an annual audit, court records say.

The audit revealed that from July 1, 2009, to Nov. 26, 2013, the credit union’s manager embezzled more than $400,000, Clark wrote.

Clark declined to identify the manager in a phone interview Friday. Online records and previous news stories name the chief executive officer and manager during the period in question as John Barry, a former Portland police officer. It’s not clear from court documents whether Barry is the person accused of embezzling funds, and there is no record of any charges against him.

Court documents do not name the credit union’s manager, and it is unclear whether that person has been charged.

Clark would not say whether the manager faces charges.

Murphy was the credit union’s chief financial officer, a loan officer, a bookkeeper and an employee. He was allowed by Judge Nancy Torresen to remain free on a personal recognizance bond until sentencing, which has yet to be schedule. He faces as much as 30 years in prison, five years of supervised release and a fine of as much as $1 million.

As a result of Murphy’s actions, the National Credit Union Administration helped a larger federal credit union acquire the Portland Police Department Federal Credit Union, said the U.S. Attorney’s Office in a written statement.

The credit union notified members in September 2014 that an internal audit had confirmed that an unnamed employee had “misappropriated credit union funds.” The credit union fired the employee immediately and then contacted the FBI and the U.S. Attorney’s Office, according to a letter to members.

John Fairbanks, a spokesman for the NCUA, said the organization does not comment on cases that are in the courts.

John Murphy, president of the Maine Credit Union League, said he is not familiar with the specifics of the alleged acts at the police credit union. John Murphy is not related to William Murphy.

“Unfortunately, in financial institutions these things happen from time to time. Fortunately, it doesn’t happen a lot,” Murphy said. “The important piece here is from a consumer standpoint – no consumer has lost any money as a result of this. The members accounts’ are federally insured.”

John Murphy said police department credit union members are now being served by TruChoice Federal Credit Union, which took over the smaller entity and maintains an office in the police station.

Scott Dolan can be contacted at 791-6304 or at:

sdolan@pressherald.com

Twitter: @scottddolan