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Court dismisses fraud lawsuit vs. New London directors

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BRIDGEPORT, Conn. (12/14/11)--A U.S. District Court in Connecticut has dismissed a civil lawsuit by Wells Fargo Advisors LLC, which had sought contributions from the directors of the now-defunct New London Security FCU, whose investment broker committed suicide after the National Credit Union Administration (NCUA) discovered $12 million missing from the credit union in 2008.

Wells Fargo Advisors LLC is the successor of Wachovia Securities, a successor in interest to A.G. Edwards & Sons brokerage firm, which had employed Edwin F. Rachleff, the credit union's' investment manager. The firm is being sued by NCUA, which is trying to recoup $10 million in losses to the National Credit Union Share Insurance Fund when the credit union was shuttered on July 28, 2008.

Wells Fargo then sued the former board members--Herbert Linder, Martin Yavner, Reuben Levin and Martin Lazars--alleging the board was negligent and seeking contributions from them in the liability related to the case. In its complaint filed, it cited a loss review report issued by NCUA's Office of Inspector General in October 2009, which allegedly faulted the credit union board for allowing Rachleff  "run of the house" on investments, according to the court ruling document.

In granting the board members' motion to dismiss the suit, U.S. District Senior Judge Warren W. Eginton said that Wells Fargo failed to sufficiently demonstrate a right to indemnity or contribution under Connecticut law. The firm had cited a state statute on joint liability in third-party negligence, which the judge said did not apply because  "all alleged losses are purely commercial in nature."

Rachleff, who was 82 at the time he died, allegedly represented to the credit union that he was opening investment accounts with the credit union's funds. Instead, he allegedly used the funds for personal investments.

The collapse of the credit union has generated several lawsuits. In addition to Wells Fargo, NCUA has sued Rachleff's estate (News Now March 12, 2009) and the former credit union's auditors (News Now March 24, 2010),  and uninsured depositors of the credit union have sued NCUA seeking damages (News Now March 8).

Paper terrorist sentenced to five years in prison

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ALBANY, N.Y. (12/14/11)--An anti-government radical who bombarded a credit union and public officials in Ulster County, N.Y., with fake bills, phony property liens and inexplicable court papers, was sentenced Monday to five years in federal prison for his acts.

U.S. District Judge Thomas McAvoy told Richard Ulloa, 52, at his sentencing that he used "reckless regard and evil intention" in perpetrating the allegedly fraudulent acts (timesunion.com Dec. 13).

Ulloa's actions began in late 2008, when Mid-Hudson Valley FCU in Kingston, N.Y., began foreclosure proceedings on his home after Ulloa fell behind on his mortgage payments.

In response, Ulloa sent a "criminal complaint" to the $729.2 million asset credit union and demanded that credit union executives pay him $46 million. He subsequently filed a $2.8 billion lien against Mid-Hudson Valley CEO Bill Spearman and other credit union officials, the newspaper said.

When police wrote Ulloa traffic tickets in the county, he allegedly responded with the same tactics, filing bogus bills and liens against police officers, judges--and later on--against county government officials, the paper said.

Ulloa was ordered to make $63,401 in restitution to the credit union and Ulster County.

PCUA introduces new marketing services

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HARRISBURG, Pa. (12/14/11)--The Pennsylvania Credit Union Association (PCUA) is introducing a pilot program through its subsidiary, Pacul Services Inc., to help credit unions reach their goals with their marketing efforts.

The pilot program--Credit Union Marketing Services--is a fee-based marketing consulting service developed to help western Pennsylvania credit unions implement and track marketing strategies--including planning, advertising, public relations, media strategies and budgeting (Life is a Highway Dec. 13).

The program is customized for each credit union and begins with a marketing plan that includes specific goals and objectives based on the credit union's strategic plan.

Sandi Carangi has been named director of Credit Union Marketing Services, and will provide customized marketing solutions for credit unions.

Marketing consulting services "helps credit unions that don't employ someone dedicated to working on marketing, or it can help free up existing staff time to work on specific marketing projects," said Corinne Sherman, PCUA vice president of fee services.

Several Pennsylvania credit unions have signed up for the pilot program, PCUA said.

Exec compensation related to assets performance

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MADISON, Wis., and COVINA, Calif. (12/14/11)--Recent compensation and staff studies indicate that credit union CEOs' compensation and salaries are related to both asset size of their credit union and their performance.

Historically, base salary represents the bulk of a credit union CEO's total compensation package, said the Credit Union National Association's (CUNA) 2011-2012 CEO Total Compensation Survey  report, which covers compensation data from 2010. On average, base salary accounts for 86% of CEO total compensation among credit unions with $100 million or more in assets, the report said.

"There's a strong correlation between CEO compensation, especially the base salary, and the size of the credit union," said the report. "As the size of the credit union increases, so does the complexity of the operations, and CEOs are compensated accordingly."

For example, the median salary for CEOs of credit unions with $1 billion or more in assets--$411,859--is nearly three times that of their counterparts in credit unions with assets totaling $100 million to $200 million, who average $139,808, according to CUNA's 2011-2012 Complete Credit Union Staff Salary Survey. See the chart for salaries in different asset size groups.

Another survey, from Executive Compensation Solutions (ECS) of Covina, Calif., noted that tying the overall compensation package to sustainable and relevant performance measures that are aligned with the interest of the credit union and its members is becoming an increasingly important practice to attract, reward and retain key value creators.

"Financial performance and performance ratios, as well as pay practices, indicate a slow and gradual easing of the tight economic environment of the past few years," said Adam Zelinsky, ECS director of operations. "While compensation increases are not dramatic, reported responses indicated a significant decrease in the number of salary and bonus freezes, as well as a significant drop in the number of credit unions that have suspended their employer match into their 401(k) plans."

ECS's Survey 2011: Employee and Executive Compensation and Benefits for the Credit Union Movement also found a higher percentage of women among credit unions than in other financial institutions and a disparity in pay levels between male and female credit union CEOs.  ECS tied participation in its survey to raising funds for Credit Unions for Kids and raised nearly $3,000 for Children's Miracle Network Hospitals.

CUNA report Staff turnover less than in prerecession

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MADISON, Wis. (12/14/11)--Credit union employees in all job classifications are more likely to stay in their positions than they were before the recession, says a new report from the Credit Union National Association (CUNA).

The overall credit union turnover rate in 2010 is 12%, according to CUNA's 2011-2012 Turnover and Staffing Survey. The figure is higher than the 2009 turnover rate of 9% and matches the 2008 rate. Prerecession turnover was about 15%.

"With heightened competition for skilled employees, it's important for credit unions to monitor turnover rates," said Beth Soltis, CUNA senior research analyst. "This is particularly important when it comes to key employees, but turnover in any department or at any level costs the organization time and money for employee training."

Hiring levels remain modest at credit unions, the report said. The creation of new positions at credit unions dipped at the onset of the recession and hasn't changed since. The percentage of employees hired to fill newly created credit union positions was roughly 5% from 2005 to 2007. In 2008, 2009 and 2010, 3% of credit union employees filled newly created positions.

"During the recession, most employers reduced staffing levels as low as they could possibly go," Soltis said. "This makes it more important than ever for credit unions to retain high-quality employees, especially those in positions critical to their credit union's success."

For more information about CUNA's 2011-2012 Turnover and Staffing Survey, use the link.

Bulldog is Illinois latest student CU

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STREATOR, Ill. (12/14/11)--Bulldog CU, Streator, Ill., is the newest student-run credit union in Illinois.

Ryan Neumann, Streator Onized CU Branch Manager (second from left), with other student workers at Bulldog CU's main location in the concession area of Streator, Ill., Township High School. (Photo provided by the Illinois Credit Union League)
Branch Manager Ryan Neumann says (BCU) was launched this school year in Streator Township High School. It will be open for an hour before classes begin and during all lunch hours--about three hours a day--for staff and students to conduct financial transactions without leaving the school.

BCU also gives Streator Onized CU (SOCU) the opportunity to employ three seniors every year through the high school work program.

BCU was opened with the intention of bringing financially literacy to students before they leave for college or start their own careers after high school. To date, about 190 students and staff either have an existing account at SOCU or opened a new one with BCU.

"If I didn't have the opportunity to start working at SOCU out of high school, I can't say I would have known much about money management, how important credit is, or just finances in general," Neumann said. "By putting a branch in the high school, we are giving the kids tools they will need to make wise financial decisions in the future."

Also, classroom seminars and presentations will be crucial in helping students better themselves and give them an understanding of the real world, Neumann said.

So far, teachers have responded well to the idea of the financial literacy classes. Topics will include: checking 101, saving for college, how to buy a vehicle, what credit is, and budgeting basics. To supplement the classroom presentations, Neumann also plans to use Mad City Money (a Credit Union National Association product) and ibudget, two interactive financial reality fair activity programs.

To help it start, BCU received an $8,000 Financial Independence and Revitalization (FIRE) grant through the Illinois Credit Union Foundation. The objective of FIRE grants is to provide assistance to credit unions to expand their ability to build and maintain viable communities by providing credit and financial services to residents and businesses in low-income and underserved areas of Illinois.

Black Friday sales among CU members soared

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RANCHO CUCAMONGA, Calif. and FRANKLIN, Mass. (12/14/11)--Credit union members spent 8.1% more and made 10.1% more transactions on Black Friday in 2011 than in 2010, according to a study by CO-OP Financial Services and Saylent Technologies, a provider of payment intelligence solutions.

"Some of the top credit unions in CO-OP Network experienced even stronger Black Friday sales growth of 30% and more," said Stan Hollen, CO-OP Financial Services president/CEO.

The analysis of Black Friday sales is not an estimate, but is based on more than 2.6 million transactions made between Thanksgiving midnight and midnight Nov. 25. Drawn from debit card transactions of 562 credit unions processed by CO-OP Financial Services, the year-over-year comparison was performed through an advanced analytics solution, CO-OP Total Revelation, powered by Saylent Technologies, and was conducted by Saylent's Insight360 consulting team.

The group's total Black Friday spending represented both brick-and-mortar establishments and Internet transactions.

Some of the key findings:

  • Credit union members rang up 13% more at restaurants and 14% more at fast food establishments on Black Friday 2011, compared with 2010.
  • Charitable and social-service organizations and fundraising chalked up 48% gains year over year.
  • Men's and women's clothing stores achieved 21% sales growth, while miscellaneous apparel and accessories were up 18%.
  • Consumer electronics captured 15% sales growth.
  • Books, periodicals and newspapers saw 95% gains.
  • Spending on used vehicles (up 70%); recreational campers, trailers and supplies (up 161%); and auto parts (up 16.5%) suggested a surge of automotive travel. Gas pumps saw a 26% gain, highway tolls rose 42%, and car washes increased 64%.
  • High-end commodities such as precious stones and metals dropped 26% in year-over-year sales.
"Credit union members are savvy consumers, and this analysis shows they are enthusiastically using debit cards to make responsible holiday purchases, using money in their accounts rather than taking on credit card debt," said Tyson Nargassans, Saylent Technologies president/CEO.