First Financial hires N.Y. firm to audit trades

October 17, 1992|By David Conn | David Conn,Staff Writer

The First Financial Federal Credit Union of Maryland, the subject of an investigation by federal regulators into its investment practices, has hired a New York accounting firm to perform an audit of the company's securities trades.

Several of those trades, made this spring through the Hunt Valley office of PaineWebber Inc., were executed with markups and commissions far exceeding industry standards, according to an article previously published in The Sun, which was based on internal brokerage documents.

First Financial responded to the article by temporarily suspending all trading with PaineWebber, according to James Skarbek, chairman of the credit union's supervisory committee, which reports to the board of directors.

He said the company also has hired the New York office of the Peat Marwick accounting firm to review First Financial's investments with PaineWebber.

A letter from the company's chairman, placed in the credit union's offices, promises the results of the review will be shared with the members, Mr. Skarbek said.

"We're working on this with the approval of the [National Credit Union Administration]," he said, referring to the government agency that regulates federally chartered credit unions.

The NCUA is conducting its own investigation into First Financial's relationship with PaineWebber, and one of its brokers, Robert W. Sitton Jr.

Mr. Sitton, who had handled the First Financial account, is married to Alfie Sitton, a former top executive at the credit union who still has full-time management responsibilities there through her role as a consultant.

That relationship apparently was in conflict with federal credit union regulations, but First Financial told the regulators Mr. Sitton had been replaced last year as their broker, and that Mrs. Sitton was no longer an employee.

But the NCUA found in routine examinations last year and this year that Mrs. Sitton was still acting in the same capacity as before she became an "independent consultant" several years ago.

And documents The Sun obtained show Mr. Sitton was to receive 99 percent of the commissions from First Financial's trades.

The NCUA has said First Financial, which has about $150 million in assets, is financially sound. The company's members include school system employees of Carroll and Baltimore counties, federal workers and others.

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