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Verdict against bank in Ponzi scheme is rare

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MIAMI (1/20/12)--A $67 million verdict Wednesday against a bank for allegedly aiding in a $1.2 billion Ponzi scheme is rare, but should serve as a cautionary note for credit unions and other financial institutions on the importance of compliance with the Bank Secrecy Act and its anti-money laundering provisions.

The verdict means that a Miami, Fla., jury decided that TD Bank helped a now-disbarred Fort Lauderdale lawyer, Scott Rothstein, defraud a group of Texas businessmen, Coquina Investments, by turning a blind eye on procedures meant to stop fraud and money laundering activities (South Florida Business Journal, Jan. 18).

Rothstein was sentenced to 50 years in prison for luring investors into his $1.2 billion Ponzi scheme. He created fictitious pre-lawsuit settlements for sexual harassment and whistle-blower lawsuits and told investors they were buying interest in the settlements.  To succeed at the scheme he needed bankers who would not ask questions about overdrafts or why he was moving large sums quickly between attorney trust accounts, said the article.

Coquina was awarded $32 million in compensatory damages and $35 million in punitive damages in the decision, which is being seen by some analysts as a signal to other victims of other possible Ponzi schemes that they could seek relief from the financial institutions involved--knowingly or unknowingly-- in funds related to Ponzi schemes. the article said.

Coquina had maintained in the lawsuit that the bank failed its responsibility to know its customers and detect fraud under BSA's anti-money laundering provisions and failed to stop the scheme at several points in the process. The bank maintains it was merely Rothstein's bank and that it was he who committed the frauds.

In March, TD Bank will face another trial related to a second set of Rothstein Ponzi scheme victims called the Razorback group. The group seeks $200 million from the bank and other defendants.

Court lifts stay on NCUA suit vs. defunct CU management

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BLUEFIELD, W.Va. (1/20/12)--A federal court in West Virginia on Wednesday lifted a stay and reinstated to active status a lawsuit filed in 2009 by the National Credit Union Administration (NCUA) against employees and family members of the now defunct Bluefield, W.Va.-based N&W Poca Division FCU.

The $2.4 million lawsuit alleges the defendants breached their fiduciary duties, and engaged in fraud, conspiracy to commit fraud, and gross negligence that contributed to the credit union's collapse. The agency is also seeking punitive damages to be determined by the court.

The stay had been ordered on Dec. 10, 2010, by Senior Status U.S. District Judge David A. Faber of the Southern District of West Virginia, Bluefield, pending criminal cases brought against credit union employees Rebecca L. Poe, assistant manager, and Pamela M. Mullins, a teller.

The two were convicted in September of embezzling more than $2.4 million from 2003 to August 2008 by using several methods,, including creating fictitious deposits into their account and accounts of family members, making fictitious loan payments; issuing official checks to themselves and family members. No funds were received by the credit union to support these.

Poe was sentenced to 51 months in prison, three years of supervised probation and ordered to pay restitution totaling more than $2.4 million. She also was banned under an NCUA prohibition order against participating in the affairs of any federally insured financial institution (News Now Sept. 29).  Mullins was sentenced in September to 30 months in prison and ordered to pay restitution of $2.4 million.

In addition to Poe and Mullins, the suit names:

  • Deborah G. Bailey, manager of the credit union, who is the mother of Poe and aunt of Mullins;
  • Kenneth J. Bailey, husband of the manager;
  • Joey L. Poe, husband of the assistant manager; and
  • Christopher Mullins, son of the teller and a member of the credit union's Supervisory Committee.
NCUA  placed the credit union into involuntary liquidation on Oct. 3, 2008, due to its insolvency, said the original lawsuit filed on June 26, 2009.

In lifting the stay, Faber ordered  that a status hearing be held to determine schedule for the case.

Michigan law requires licensed tow companies on repos

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LANSING, Mich. (1/20/12)--A new Michigan law requires towing companies to obtain authorization from a state agency to operate, according to information provided to the Michigan Credit Union League (MCUL).

The Midwest Auto Auction in Michigan advised MCUL & Affiliates that Public Act 111 of 2011 now requires all businesses that transport vehicles for hire as part of their business operations to be subject to the Michigan Motor Carrier Act and to obtain intrastate authority from the Michigan Public Service Commission (Michigan Monitor Jan. 16). The law went into effect Jan. 1.

Failure to register is a misdemeanor punishable with a fine up to $500 and/or 90 days in jail. Also, operators who are not licensed can have their tow truck and any attached vehicle impounded.

Although the state's towing industry was in the process of becoming licensed, they were surprised by the legislation, MCUL said. Credit unions and other auto lenders in the state should ensure that the companies they hire to tow or repossess vehicles are licensed due to potential impounding, MCUL said.

All previously existing exemptions for towing companies have been eliminated, including towing companies, repossession operations, repair facilities, auto auctions and dealerships, MCUL said. The license is good for the calendar year and must be renewed by the carrier every year.

Foreclosure bill headed to Wisconsin House

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MADSION, Wis. (1/20/12)--The Wisconsin State Senate Tuesday approved the Expedited Foreclosure Bill (SB 307), which will combat blight by placing abandoned homes on the real estate market within five weeks, rather than within two months under current law. The Wisconsin Credit Union League supports the legislation.

State Sens. Lena C. Taylor (D-Milwaukee), Glenn Grothman (R-West Bend) and Tim Carpenter (D-Milwaukee) authored the bill (News Channel 7 Jan. 18).

The Wisconsin league said it supports communities' efforts to control blight, encourage redevelopment and protect home values through the adoption of the strongly bipartisan proposal, Senate Bill 307.

"To be clear, the purpose of SB 307 is quite narrow and targeted at only shortening the foreclosure process for abandoned properties, which is a particular challenge for the city of Milwaukee," Tom Liebe, league government affairs vice president, told News Now. "Credit unions are not advocating for additional changes to shorten the foreclosure process, limit homeowner's rights and continue to support a balanced procedure for foreclosure.

"Credit unions have never deviated from their practice of making prudent mortgage loans and lead the industry when it comes to keeping consumers in their homes when faced with challenging financial circumstances," Liebe added.

The bill stipulates factors to be considered to determine if a property has been abandoned. It also allows the court to obtain evidence from a representative of a local government where the property is located, so it can assist in ascertaining whether the property was abandoned, News Channel 7 said.

Colombia forms new CU trade association

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BOGOTA, Colombia (1/20/12)--Eleven of Colombia's 192 credit unions are forming a new credit union trade association in response to growing regulatory burdens and an increasing need for advocacy.

This week's meeting between World Council of Credit Unions (WOCCU) leadership and members of the new Colombian credit union trade group included (from left): Brian Branch, WOCCU president/CEO; Luis Fernando, Creafam; Vincente Pabon, Congente; Victor Hugo Camacho, Cooptenjo; Marco Antonio Fonseca, Coofisam; WOCCU Chair Manuel Rabines; Juan Carlos Borda, Alianza; Jesús Medina, Commerciacoop; Juan José Camargo, Sumared; and WOCCU Project Director Oscar Guzmán. (Photo provided by the World Council of Credit Unions)
The Asociación Colombiana de Cooperativas Financieras y de Ahorro y Crédito was established in December. The new association met this week with World Council of Credit Unions (WOCCU) Chairman Manuel Rabines of Peru and WOCCU President/CEO Brian Branch.

The new organization represents a positive step for Colombia's credit unions, said Rabines, who is also president/CEO of Federación Nacional de Cooperativas de Ahorro y Crédito del Perú (FENACREP), World Council's member association in Peru.

The founding credit unions serve 600,000 members and control 30% of all credit union assets in Colombia, a country whose 192 credit unions serve 2.2 million members, or 7.5% of the population.

Some Colombian credit unions have recovered their space from setbacks in the 1990s, and now there are credit unions with as much as US$400 million in assets and serving 300,000 members, Rabines said. "To organize an association is part of the process of integration, first among credit unions, then with their national cooperative federation and one day with World Council at the international level."

WOCCU has worked extensively in the past with Colombia's credit union movement, now 50 years old. Since 2003, the global credit union development agency has participated in four programs to help strengthen Colombia's credit unions and help them grow, especially in their outreach to poor population segments in rural areas.

The Colombian government invited WOCCU to replicate its Semilla Cooperativa [cooperative seed] rural outreach model, originally developed through a World Council program in Mexico, to expand financial inclusion in some of Colombia's most marginalized areas.

WOCCU will train and equip credit union field officers to travel to remote communities to deliver services using mobile technology, helping to expand the existing credit union networks and reach rural people who formally had no access to financial services. The three-year, $2.5 million program will employ mobile technology to bring financial services to 100,000 previously unbanked people in rural and low-income communities nationwide.

Continuing development efforts and the formation of a new trade association should give Colombia's credit unions the structure they need to grow and expand services, Branch said.

"World Council has worked with many of these credit unions for several years now, so we are familiar with their leadership, their financial soundness and the quality of the services they provide," Branch said. "We are glad to see them organize and become part of the international community."

Members reject merger of two Louisiana CUs

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DENHAM SPRINGS, La. and METAIRIE, La. (1/20/12)--Members of the $96 million asset Main Street Financial FCU, Denham Springs, La., voted Tuesday to reject a merger with $260 million asset Jefferson Financial CU, Metairie, La.

Some Main Street Financial FCU members may have had concerns about possible branch closings, Mark Rosa, president/CEO of Jefferson Financial CU told News Now.

Among the reasons Main Street Financial contacted Jefferson Financial, located in a New Orleans suburb, as a potential merger partner was because other Baton Rouge-area credit unions would present a geographical overlap of service coverage, Rosa said.

He added that Jefferson Financial FCU had offered its assurances that existing Main Street Financial branches would remain open. "We absolutely would need that infrastructure," Rosa said. "We need coverage in that area."

Main Street Financial FCU also was "bruised" by the recession, Rosa said.

About 10% of the Main Street Financial FCU membership voted on the merger, Rosa said. He estimated that two-thirds were "no" votes.

Rosa said he still remains open to a merger. The Jefferson Financial board would discuss the matter at a meeting yesterday, he said.

He suggested that Main Street Financial FCU members would be more open to the merger if they were provided with more information.

"I think we need more of a town hall-type meeting, where we can all sit down and people can ask questions and we can provide them with all the information they need," Rosa said.

Corporate Central to host strategic balance sheet conference

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MUSKEGO, Wis. (1/20/12)--Corporate Central CU will host a strategic balance sheet management conference Feb. 8 in Muskego, Wis.

The conference is designed to challenge management ideas on future earnings and growth during a sluggish economy. The conference also will offer ideas on how to turn the asset/liability management process from a regulatory requirement to a profitable decision-making tool.

The conference will be presented by Dave Koch, chief operating officer of Farin & Associates, who specializes in asset/liability and interest-rate risk management.

Koch will examine recent regulatory guidance and build the framework for compliance, with credit union growth and capital needs in mind. He also will tell how to grow loans and management risks to ensure profitability necessary to manage capital and risk.

SECU offering two programs to aid tax payers

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RALEIGH, N.C. (1/20/12)--State Employees' CU (SECU) is offering two programs to assist North Carolina tax payers.

The Raleigh, N.C.-based SECU has partnered with the North Carolina Department of Revenue (DOR) and the Office of State Personnel to promote individual income-tax debt-payment loans.

SECU will offer qualifying members a 5% loan to repay unresolved balances, generating savings for the members and allowing them to take advantage of up to 35% in a penalty/fee waiver being offered by the state.

DOR's new program is offered through April 30 when taxpayers can repay past due taxes, with the DOR  waiving unpaid penalties and collection fees. 

Under the new loan program, a SECU member who owes $2,000 in back taxes and interest can expect savings of about $700 through waived penalties and fees. A member who owes $4,000 would save nearly $1,400 in penalties and fees on back taxes.  Terms of the SECU loan will, in most cases, allow for payments of $50 to $125 per month. 

A second tax-related program the $23 billion asset SECU is offering will help members save money through various tax preparation services, including the no-cost Volunteer Income Tax Assistance (VITA) program sponsored by the Internal Revenue Service (IRS) and the credit union's own low-cost tax preparation service.

SECU has offered the IRS VITA service each of the previous four years and its own for two years, helping members save in fees and claim larger refunds through tax credits such as the Earned Income Tax Credit. 

In 2011, SECU tax preparers filed more than 53,000 returns, with members receiving $82 million in refunds and saving $7.9 million in tax preparation fees.

CU System briefs (01/19/2012)

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  • LONDON (1/20/12)--A new cooperatives bill in Britain would make it easier for the nation's residents to set up and manage cooperative businesses, said U.K. Prime Minister David Cameron Thursday during a speech in London. Addressing popular capitalism, Cameron noted that the government wants to encourage different capitalism models where employees have a more direct stake in the success of their companies.  If people have a stake in their business, they will support its growth and share its success, Cameron said. The bill would consolidate and streamline the current law on cooperatives, which he said is "outdated."  Cooperatives are a "vital branch of popular capitalism," he said.  2012 has been designated by the United Nations as the International Year of the Cooperative …

SunCorp plans town hall meetings webinar on status

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WESTMINSTER, Colo. (1/20/12)--System United Corporate FCU (SunCorp) has added eight more town hall meetings and a town hall Web conference with Western credit unions considering alternatives for cooperative financial solutions.

In the meetings, SunCorp's executive management team will discuss its capitalization status and business plans for the future, said the corporate's announcement. Credit unions also will learn more about SunCorp's payment, liquidity and investment services.

The meetings will be held in the West and Northwest to discuss the value and service SunCorp offers, according to Thomas R. Graham, president/CEO.

Currently scheduled meetings are at:

  • Idaho Falls, Idaho, Jan. 24;
  • Boise, Idaho, Jan. 26;
  • Federal Way, Wash., Jan. 31;
  • Milwaukie, Ore., Feb. 1;
  • Redwood City, Calif., Feb. 8;
  • Vacaville, Calif., Feb. 9;
  • Brea, Calif., Feb. 15; and
  • Hawthorne, Calif., Feb. 16.
The town hall Web conference will be Feb. 23. For more information, use the link or e-mail a business development officer.