MADISON, Wis. (12/23/09)--A dispute between CUNA Mutual Insurance Society (CUMIS) and credit unions looking to recover losses related to fraud at CU National Mortgage Corp. has moved to U.S. District Court in Madison, Wis., from state court. “The case was moved to federal court by one of the credit unions,” said Rick Uhlmann, CUNA Mutual Group senior manager of media relations. “This is a procedural action that does not change the substance of the dispute over insurance coverage.” Twenty-six credit unions lost $140 million after being defrauded by CU National Mortgage, which closed after filing for bankruptcy in February. The credit unions argue that the losses they incurred should be covered under surety bonds they purchased from CUMIS, a subsidiary of CUNA Mutual Group. CUMIS filed two declaratory judgment actions in June and August in Wisconsin state court asking the court to declare that the surety bonds did not cover the losses from the CU National Mortgage fraud (News Now Dec. 8). CUNA Mutual filed the judgment action to resolve questions about coverage. The court served the actions, and the case was moved to federal court last week. CU National Mortgage President, Michael McGrath, pleaded guilty in June to defrauding the credit unions and Fannie Mae. He admitted to conspiring with others to fraudulently sell credit unions loans and use the proceeds to finance U.S. Mortgage’s operations and investments for himself and the company (News Now June 12).