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NCUA sues defunct-CU members on real estate sales
SALT LAKE CITY (5/14/10)--The National Credit Union Administration (NCUA), in its role as liquidating agent for Utah-based Heritage West FCU, has succeeded in substituting itself for the credit union in several lawsuits against members who defaulted on construction loans tied to a failed real estate venture in Salt Lake City. NCUA also succeeded in removing the cases from a state court to a federal court. In three suits, which are now in the U.S. District Court for the District of Utah, Central Division, in Salt Lake City, NCUA maintains that the members defaulted on their speculative real estate loans then bought the properties back during foreclosure sales at a hefty discount. In separate suits, NCUA is seeking the discount amounts--$112,000 from Brent R. Preece; $219,000 from Warren B. Shaw and Martina Shaw; and $215,000 from Randal B. Rasmussen and Carma L. Rasmussen. A fourth suit, involving several dozen members and full of a number of claims and counter claims, alleges that the credit union and the real estate developer, Castle Stone Homes, violated a number of laws, including federal and state securities and exchange laws and the state Uniform Fraudulent Transfer Act. Court documents allege that dozens of members invested in construction loans for a project developed and built by Castle Stone. The members allege that between 2005 and 2007, the developer promised them high returns on their investment property. Heritage West FCU, formerly Tooele FCU, partnered with Castle to finance the construction of the houses to be built, marketed and sold by Castle Stone. However, the project unraveled about 14 to 24 months after the construction began, with homes only 50% to 75% complete. Castle Stone negotiated extra loans with the credit union for all the investors to complete the homes. Thirty-six months after construction started, the homes still were not complete, the court documents said. Heritage West never recovered from the venture, a situation similar to Colorado-based Norlarco CU and Michigan-based Huron River Areas CU. Those credit unions also financed real-estate projects that failed in Florida. In 2009, NCUA negotiated a purchase and assumption agreement for Heritage West with Chartway FCU.


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