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Central States Mortgage receiver hearing is Tuesday
MILWAUKEE, Wis. (4/6/09)--A hearing has been scheduled for Tuesday in Milwaukee County Circuit Court to appoint a receiver to oversee the liquidation of mortgage lender CSMC Inc., the parent of the now defunct Central States Mortgage Co. Central States provided mortgage services to more than 250 credit unions before it closed its doors on March 9. A majority of CSMC is owned by credit unions. It filed for a liquidation receivership late on March 27 (News Now March 31). Judge John DiMotto told more than a dozen lawyers in a two-hour hearing Wednesday to return to court Tuesday so he could appoint a receiver. DiMotto said he had not received financial information needed from CSMC to set the bond for the receiver (Milwaukee Journal Sentinel April 1). The Wauwatosa, Wis.-based CSMC has requested the court to appoint Philip Ostroski, managing director of MorrisAnderson and Associates, as receiver. However, attorney Stephen Kravit told the court Wednesday that the court should pick the receiver. Kravit represents former Central States founder and CEO Richard Jungen and three other executives who were ousted after the mortgage servicer discovered they were operating another company. Central States sued the former executives, alleging the business caused $15 million in losses, according to the Journal Sentinel. Kravit also argued that a receiver should be appointed as soon as possible because the company's board is split and operating illegally, the article said. CSMC attorney David Meany said the firm is properly governed by its board and he asked the court to postpone the hearing for 10 days to provide time to work out issues with the company's largest creditors. Nineteen of the 20 largest creditors are credit unions. Kravit also questioned the decision to bring in a company from Michigan to service pending loans without disclosing the financial arrangement and the hiring of a public relations firm. A receivership is a state court process similar to a federal bankruptcy court liquidation. In addition to the receivership, CSMC has sued Jungen and the former executives. Recently another court froze more than $2 million of Central States' assets at the request of a creditor.


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