The case underscores how a small, community-based financial institution unraveled after its chief executive abused his authority, ultimately leading to federal intervention and a merger.

A former credit union chief executive in eastern Indiana was sentenced this week to two years in federal prison for orchestrating a scheme that defrauded the institution he was entrusted to lead, federal prosecutors said.

Daniel Johnson, 37, of Centerville, Indiana, was sentenced to 24 months in prison followed by two years of supervised release after pleading guilty to two counts of bank fraud, according to the United States Attorney’s Office for the Southern District of Indiana. Johnson was also ordered to pay $285,855.66 in restitution, reflecting nearly all of the losses sustained by the credit union.

From his position as chief executive officer and manager of Richmond City Employees Federal Credit Union, Johnson wielded broad authority over loan underwriting and processing. While credit union officials were permitted to apply for loans, such transactions required review and approval by the institution’s board of directors.

Court documents show that in August and September 2021, Johnson submitted two fraudulent loan applications for $150,000 each, claiming the funds would be used to purchase recreational vehicles. Prosecutors said he never intended to buy the vehicles. Instead, he falsely asserted that the board had approved the loans, when no such approval had been granted.

After receiving the funds, Johnson used a portion to pay off earlier secured loans totaling about $65,700, effectively eliminating the credit union’s security interest. He then diverted the remaining proceeds to personal expenses, including student loan payments and the purchase of a home. In one instance, prosecutors said, he forged his then-wife’s signature to make it appear she had requested the second loan.

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Through the scheme, Johnson obtained what were effectively unsecured loans totaling about $300,000, leaving the credit union with losses estimated at $285,855.66.

“As the chief executive officer, Johnson was tasked with protecting money earned by hard working public servants for the City of Richmond,” Tom Wheeler, the U.S. attorney for the Southern District of Indiana, said in a statement. “Instead, Johnson chose to abuse this trust and line his own pockets through dishonesty.”

Timothy J. O’Malley, the F.B.I.’s special agent in charge in Indianapolis, said the case demonstrated the government’s resolve to pursue fraud within financial institutions. “Credit union members rely on their leaders to safeguard their finances — not misuse them for personal gain,” he said.

The fallout extended beyond the criminal case.

In December 2022, the National Credit Union Administration placed Richmond City Employees Federal Credit Union into conservatorship, citing safety and soundness concerns. The credit union, chartered in 1961 and serving employees of the City of Richmond, merged into Kemba Credit Union of West Chester, Ohio, on April 1, 2023.

At the time of the merger, the Richmond credit union had 788 members and $6.9 million in assets. Kemba Credit Union now serves more than 130,000 members and holds $1.7 billion in assets.