Former Credit Union Manager Kelly Jo Muzzana Sentenced After Multi-Year Embezzlement Fraud at Altana FCU

Former Credit Union Employee Sentenced for Embezzlement Scheme

A Montana judge has sentenced Kelly Jo Muzzana, former operations manager at Altana Federal Credit Union in Billings, to 12 months and one day in prison for embezzlement. The sentencing, which took place on May 8, 2025, marks the conclusion of a case that prosecutors described as both unique and particularly egregious.

U.S. District Court Judge Susan P. Watters also ordered Muzzana, 40, to pay $65,046 in restitution and a $100 assessment fee. Following her prison term, she will serve three years of supervised release.

A Breach of Trust from Within

What distinguished Muzzana’s case from typical payment card fraud was her position of trust and responsibility within the credit union. As operations manager at the $609 million Altana Federal Credit Union, Muzzana was specifically tasked with overseeing the institution’s fraud alert system—the very safeguards designed to protect members from the type of crime she was committing.

Between January and December 12, 2023, Muzzana executed a sophisticated scheme that exploited her privileged access to member information. She created duplicate debit and credit cards, which she took home, and intercepted undeliverable cards that had been returned to the credit union by postal services.

Using these fraudulently obtained cards, Muzzana made more than $65,000 in unauthorized purchases both online and at retail locations throughout Billings.

A Calculated Cover-Up

Federal prosecutors noted that Muzzana’s position gave her unique opportunities to conceal her criminal activities. “She was literally responsible for reporting fraud perpetrated on Altana’s customers. The irony is, she was the one perpetrating it, which created significant challenges to the investigation,” prosecutors wrote in their sentencing recommendation.

Muzzana further concealed her actions by personally handling fraud claims from affected members, facilitating reimbursements herself, and helping to prevent law enforcement detection. This elaborate cover-up made it “difficult for bank analysts and investigators to decipher what were ‘other’ thefts from Muzzana’s thefts. This was by design,” according to prosecutorial documents.

Her scheme eventually unraveled when a member reported a fraudulent charge. When a detective contacted the credit union about the report, Muzzana downloaded the call recording, learned of the investigation, and immediately fled the building. She never returned to her position at Altana.

Consequences for the Credit Union

While Altana reimbursed all affected members through its insurance from the National Credit Union Administration, the institution suffered significant reputational damage.

In a victim impact statement, Altana FCU President/CEO Jason Hagadone emphasized the fundamental breach of trust that occurred: “As a financial institution, our members entrust us with one of the most important aspects of their life: Their finances. Kelly breached that trust by stealing and using their debit cards.”

The National Credit Union Administration Board found that Muzzana’s actions “prejudiced or could have prejudiced the interests of the credit union’s members” and demonstrated “personal dishonesty and/or unfitness to participate in conducting the affairs of a credit union.”

Legal Proceedings and Sentencing

Muzzana pleaded guilty in July 2024 to one felony count of embezzlement by a credit union employee. Though prosecutors had recommended a 21-month sentence in their memo to the court, Judge Watters ultimately sentenced her to 12 months and one day in prison.

The charge carried potential maximum penalties of up to 30 years in prison, a $1 million fine, and five years of supervised release, making the actual sentence considerably more lenient than what could have been imposed.

Expressions of Remorse

In a letter submitted to the court, Muzzana expressed remorse for her actions and accepted responsibility for the consequences. “This experience has been profoundly humbling,” she wrote. “I have taken steps to understand the impact of my choices and have begun the work of rebuilding my integrity. I am committed to making amends to the extent possible and to never repeating this kind of behavior in the future.”

Industry Implications

This case highlights the unique vulnerabilities that financial institutions face from internal threats, particularly from employees in positions of trust with access to sensitive systems and information. The fact that Muzzana was specifically responsible for fraud prevention created a particularly challenging situation for detection and investigation.

For credit unions and other financial institutions, the case underscores the importance of implementing robust internal controls, separation of duties, and oversight mechanisms that can detect fraudulent activities even when perpetrated by those in positions of authority.

The National Credit Union Administration continues to emphasize the importance of internal controls and employee oversight as critical components of institutional risk management, particularly as digital banking systems create new opportunities for fraud and embezzlement.

Altana Federal Credit Union’s experience serves as a cautionary reminder that trust must be balanced with verification at all levels of financial institution operations, even among those specifically tasked with protecting member assets.