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CU System briefs (07/19/2010)

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* CHICO, Calif. (7/20/10)--Chico, Calif., police have issued a health caution about a suspect in a robbery Tuesday at the Oroville branch of Yuba City-based Sierra Central CU who may present a health risk to law enforcement and the public. Laura Jane Murray, 48, has MRSA, an infectious disease resistant to medication, has open sores on her arms and is suspected of having a heroin addiction, said a police bulletin (ChicoER.com July 16). Murray reportedly told a friend she had robbed the credit union. She was picked up by police and the money returned to the credit union, but the county jail refused to incarcerate her because of the medical condition. She was taken to Oroville Hospital, but against medical advice left the hospital and allegedly robbed a bank, police said. She was still at large at press time ... * WASHINGTON (7/20/10)--Government Printing Office (GPO) FCU, based in Washington, D.C., announced that William Lewis, president/CEO, has left the $33 million asset credit union. The board named Marcia Dixon, a 16-year credit union veteran, as interim president/CEO. She served as loan manager for six years, a position she will continue to hold during the interim period. The board also engaged the services of Lindsay A. Alexander, management consultant and former CEO of NIH FCU, to assist staff and the board until a new CEO is named. She will focus on evaluating systems and processes for efficiency and best practices; managing investments and the asset liability management program; ensuring the credit union's compliance program is maintained in line with industry requirements, and ensuring the credit union remains aligned with its strategy of building trust while meeting diverse needs of its members ... * GRAND RAPIDS, Mich. (7/20/10)--Don Mills, CEO of Alpena Alcona Area CU, Alpena, Mich., has been elected to the board of directors of CU*Answers, the Grand Rapids-based credit union service organization (CUSO). Alpena Alcona Area CU joined the CU*Answers network in 2005. He joins incumbents Vickie Schmitzer, Frankenmuth (Mich.) CU; Scott McFarland of Honor CU (formerly BTCU), St. Joseph, Mich.; Dave Wright, Services Center FCU, Lankton, S.D.; Jeff Jorgensen, Sioux Empire FCU, Sioux Falls, S.D.; Chris Butler, Community CU, Lacrosse, Wis.; and Dean Wilson, Focus CU, Wauwatosa, Wis. ...

Investors sue for losses in New London closure

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NEW LONDON and BRIDGEPORT, Conn. (7/20/10)--Five individuals who lost investments when the New London (Conn.) Security FCU (NLSFCU) was shut down in July 2008 have filed a $4 million lawsuit against the credit union's board and longtime manager, auditors, legal advisers, brokerage firm and the widow of the credit union's longtime investment adviser. The suit was filed in U.S. District Court for the District of Connecticut in Bridgeport on June 14, by member investors Melvin Goldblatt, Joan Lazerow, and Douglas C. Antupit, all of Connecticut; Mark D. Fetcher of Florida, and Gloria Johnston of California, according to the court documents filed. They seek a jury trial and more than $4 million with punitive damages. Defendants include Wells Fargo Advisors, a subsidiary of Wells Fargo & Co., which is a successor in interest to Wachovia Securities and A.G. Edwards and Sons. The credit union's long-time investment adviser and former A.G. Edwards branch manager Edwin F. Rachleff committed suicide the same day that the National Credit Union Administration (NCUA) closed the credit union. NCUA later accused Rachleff of carrying out a long term fraud that led to the credit union's collapse. Other defendants include the credit union's former auditing firm Beller, Shepatin & Co., and former legal counsel, Suisman, Shapiro, Wool, Brennan, Gray & Greenberg, and Rachleff's widow, who is executor of his estate. Attorney Robert Reardon represents the plaintiffs. The lawsuit claims violation of the Unfair Trade Act. It alleges that the law firm engaged in legal malpractice, Wells Fargo was negligent in supervising Rachleff, the credit union board breached its fiduciary duties in overseeing the investments, and the auditors were negligent and careless in failing to discover the discrepancies of the embezzlement. The suit claims that Rachleff embezzled more than $12 million from 1988 until July 2008, when the fraud or imprudent investments was discovered. The suit alleges the credit union's board failed to maintain a system of internal controls such as establishing a credit or supervisory committee, failed to establish adequate lending policies, and failed to separate the investment adviser's and investment safekeeper's roles. The "lax internal control environment," said the document, "created an environment susceptible to fraud, misappropriation or imprudent investment. The board accepted "highly suspicious statements from" A.G. Edwards typewritten on black brokerage-firm forms and failed to conduct regular meetings or keep minutes. The law firm, the suit alleges, failed to recognize problems including the need for "periodic rotation of external auditors." Other lawsuits have been filed stemming from the fraud and the subsequent collapse of the credit union. In separate suits, NCUA--whose share insurance fund lost $10 million from the credit union's failure--has sued Wells Fargo Investment Advisors and former credit union auditors Ed Lorah & Associates LLC seeking to recoup the loss (News Now March 24). Credit union investors lost about $570,000 in accounts that exceeded the $100,000 insurance limit that was in effect when the credit union was shuttered (The Day July 17).

Personal Care America FCU Fairfield University EFCU merge

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TRUMBULL, Conn. (7/20/10)--Personal Care America (PCA) FCU has merged the struggling Fairfield University Employees FCU (FUE FCU), a $2.2 million asset credit union, into its membership, according to a press release from Personal Care America. The merger, approved by the National Credit Union Administration June 30, was effective Friday. Both credit unions are based in Trumbull, Conn., although PCA FCU also has offices in Fairfield, Conn., and Jefferson City, Mo. PCA FCU has assets totaling $18 million and will serve more than 3,600 members in Connecticut and Missouri. NCUA noted it approved the merger because Fairfield was in "poor financial condition." according to its monthly insurance report. PCA FCU also has added students of Fairfield University and Fairfield Preparatory High School to its field of membership. The addition brings about 6,000 potential new members to the credit union. John E. Keet Jr., president/CEO of PCA FCU, said the merger brings an expanded suite of services including electronic services and on campus ATMs. He also welcomed two FUE FCU board members--Vice-Chairman Michael Tortora and Treasurer Philip Lane to PCA's board. "The decision to merge was not an easy one, but in light of the economic downturn, several loan defaults and investment losses, we had to do what was best for our membership, so they could continue to access credit union services locally," said Tortora.

CEO of CU Atlanta killed by police

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ATLANTA (7/20/10)--The CEO of CU of Atlanta was shot and killed by New Jersey police over the weekend, according to local media reports. Defarra Ivan Gaymon, 48, was shot and killed in a park Friday by an Essex County, N.J., sheriff’s detective. Gaymon, a former Montclair, N.J., resident, was visiting the area from Atlanta for a high school class reunion (NJ.com July 19). Gaymon was shot once in the chest by the detective at about 6 p.m. He died at the hospital later that evening. Police have not yet said what caused the shooting. Gaymon did not appear to be armed, the newspaper added. The detective also was taken to the hospital. CU of Atlanta has placed a memoriam of Gaymon on the homepage of its website with the message: “CU of Atlanta extends condolences to the family of DeFarra ‘Dean’ Gaymon who passed away suddenly July 16, 2010. We are deeply saddened at the loss of Mr. Gaymon and offer our most sincere sympathy to the Gaymon family.” Gaymon had been CEO of CU of Atlanta since March 2004. Previously, he served as vice president of operations at South Carolina State CU, Columbia, S.C. CU of Atlanta has $55 million in assets.

NCUA OKs Rutgers studentalumni CU acquisition by Affinity

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ARLINGTON, Va. (7/20/10)--The National Credit Union Administration (NCUA) has confirmed it approved a merger of Rutgers University Student and Alumni FCU (RUSA FCU), based in New Brunswick, N.J., into Affinity FCU of Basking Ridge, N.J. According to the agency's insurance report of activity, the merger was approved June 30 in Region II. The reason stated for the merger was that the nearly $3.5 million Rutgers was struggling and in "poor financial condition." Affinity FCU has nearly $2 billion in assets and nearly 135,000 members. RUSA FCU had 2,385 members. In November 2009, another credit union serving the Rutgers community, Rutgers FCU, said it and RUSA were considering a merger proposal to provide economies of scale. . Rutgers FCU serves faculty, while RUSA serves students and alumni of the Rutgers University system (News Now Nov. 16).

N.C. league secures CUs spot in foreclosure prevention bills

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GREENSBORO, N.C. (7/20/10)--The North Carolina General Assembly adjourned July 10 ending its 2009-2010 session, and Gov. Beverly Perdue signed the budget. Many of the pieces of legislation that were passed will impact credit unions, according to the North Carolina Credit Union League. Reducing the number of foreclosures in North Carolina was a priority for legislators in the session and several measures aimed to help borrowers stay in their homes were passed (Weekly Update July 16). Bills affecting North Carolina credit unions include:
* Senate Bill 1216--Will extend the State Home Foreclosure Prevention Program--set to end this fall--until May 2013 and expand the program to all borrowers at risk--not just those with subprime loans. Proceeds from the $75 fee assessed prior to filing the notice of hearing will fund the expansion and support counseling and nonprofit legal services. The league secured changes to the legislation making the Credit Union Division an active participant in the foreclosure prevention program. * Senate Bill 1015--Will limit foreclosure rescue scams by tightening North Carolina laws, including significant restrictions on two types of real estate transactions: lease-purchase contracts and contracts for deed/land installment sales. The league said it closely monitored the bill to ensure that credit union transactions remained exempt. * Senate Bill 1400--Will prohibit a power of sale foreclosure while the mortgagor is on active military duty or within 90 days after a period of military service. A judicial foreclosure would still be permitted. The bill works in conjunction with the federal Service Members Civil Relief Act and will take effect in January.

NCUA fires Arrowhead management member demands explanation

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WASHINGTON (7/20/10)--The National Credit Union Administration (NCUA) fired four former Arrowhead Central CU employees who were placed on temporary administrative leave when NCUA assumed control of the credit union June 25. In a related development, a credit union member who is an economist has criticized NCUA’s actions in the matter. Arrowhead Central CU, an $876 million asset credit union based in San Bernardino, Calif., had been placed into conservatorship “due to declining financial condition,” NCUA announced June 25. Arrowhead, a full-service credit union, has provided financial service to people residing in the counties of San Bernardino and Riverside, Calif. The decision to conserve a credit union enables the credit union to continue normal operations with expert management in place correcting previous service and operational weaknesses, NCUA said (News Now June 28). The employees were Arrowhead CEO Larry Sharp; Daniel Marciante, chief financial officer; Gene Shabinaw, senior vice president of lending; and Ray Messler, senior vice president of strategic development (Fontana Herald News July 16). “Arrowhead Central CU is open for business and has continued uninterrupted service to members since the June 25 conservatorship,” John McKechnie, NCUA director of public and congressional affairs, told News Now. “The credit union is operating normally, and member funds are federally insured up to $250,000. NCUA’s principal goal in conserving Arrowhead CU is to protect the members and preserve their assets. “Given that losses at Arrowhead were continuing, and the credit union was not reversing negative trends and was not on a trajectory to return to profitability, the most prudent course of action was for NCUA to assume control of Arrowhead,” he added. “NCUA is conducting a thorough review of Arrowhead’s operations, and will make a determination about the future of the institution when that review is completed.” In a related development, Redlands, Calif.-based economist John Husing, a member of Arrowhead for 22 years, drafted a letter to Deborah Matz, NCUA chair, demanding an explanation for the agency’s decision to take over Arrowhead. He is also seeking community input on the credit union’s future (The Press Enterprise July 16). He has started circulating the letter among businesses and political leaders in the credit union’s service area, in attempts to add signatures of support, the newspaper added. Husing wants NCUA to provide members proof of why it needed to seize Arrowhead, and also have an independent auditor look at the condition of the credit union as of June 25, the paper said. Husing and others have posited that Arrowhead was healing financially. Husing told the newspaper a few business leaders have already agreed to sign the letter, the paper added.

Let CUs help create jobs says IScranton Times-TribuneI

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SCRANTON, Pa. (7/20/10)--The consumer benefits that could be derived from an increase in credit unions’ member business lending continue to receive positive media attention. The Obama administration and Federal Reserve Chairman Ben Bernanke have been pushing to loosen credit for small businesses, according to an editorial in the Friday Scranton (Pa.) Times-Tribune. A bill in Congress would allocate $30 billion through community banks to small businesses to help them expand or increase their payrolls, the newspaper added. “An amendment to the bill could produce more capital for small businesses without additional federal spending,” the paper said. “It would create a regulatory change, authorizing credit unions to increase small business lending from 12.25% of an institution's total assets to 27.5%. According to the National Credit Union Administration, which cited Credit Union National Association Statistics, “the change could make available about $10 billion in additional credit for small businesses, enough to help those businesses create up to 100,000 jobs,” the paper added. The $10 billion infusion to small-business lending can be accomplished quickly without any cost to taxpayers, and therefore Congress should pass the amendment, the paper concluded. To read the editorial, use the link. SEE RELATED STORY (“MBLs could be front and center in Senate”).

Most MasterCard issuers OK Heartland branch settlement

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PURCHASE, N.Y. (7/20/10)--More than 99% of MasterCard's issuers eligible for compensation from a data breach settlement with Heartland Payment Systems Inc. have approved the settlement agreement, said the card company Thursday. The $41.1 million settlement announced in May was related to a breach, disclosed in January 2009 but occurring the previous year, that exposed 130 million credit and debit cards. It was the largest breach in history and affected thousands of credit union members as well as consumers. (News Now May 21). The companies needed 80% of eligible MasterCard issuers to agree to accept an alternative recovery offer as part of the approval of the settlement. In January, Heartland agreed to pay up to $60 million to issuers of Visa-branded credit and debit cards (News Now Jan. 11). Earlier it entered settlements of $3.6 million with American Express and $2.4 million in a consumer cardholder class action suit (News Now Dec. 21 and Dec. 29). The MasterCard and Visa settlements require card issuers to waive rights to any other recovery for claims of losses related to the breach and its sponsoring bank acquirers through litigation and other remedies. When the settlement terms were announced in both the Visa and MasterCard cases, attorneys for a small group of credit unions and banks had indicated the settlement amounted to pennies on the dollar.

Missouri governor vetoes GAP ATM fee bills

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JEFFERSON CITY, Mo. (7/20/10)--Missouri Gov. Jay Nixon has vetoed a bill that affects credit unions in two ways--in regards to guaranteed asset protection (GAP) and ATM fees--said the Missouri Credit Union Association. The bill, S.B. 777, said financial institutions may offer GAP products. Also included in the bill was a provision that allows the owner or operator of an ATM to charge an access fee or surcharge to an individual conducting a transaction with a foreign bank account. Foreign banks can charge Americans a fee when they travel overseas, the association said (The Missouri difference July 16). Nixon indicated in a letter that the state attorney general continues to receive complaints about GAP products, said Peggy Nalls, association senior vice president of Public/Legislative Affairs. “We maintain, and have communicated, that the complaints are not generated by credit union GAP products,” Nalls said. “Credit unions may continue offering these products, but we will be monitoring bills closely next session for any GAP-related legislation. We expect to support legislation regarding the collection of ATM fees from international travelers in the 2011 session.” To read Nixon’s veto letter, use the link.

CUNA calls for entries for Community CU of Year award

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MADISON, Wis. (7/20/10)--The Credit Union National Association (CUNA) is accepting credit union entries for the 2010 Community Credit Union of the Year Award, which recognizes the outstanding work being done by community credit unions nationwide. Awarded annually, this year’s competition will recognize four award-winning credit unions that excel in the advancement of the ideals of the credit union movement, are active in their communities, and provide services that meet the needs of their diverse communities, CUNA said. Winners will be announced at the 2010 CUNA Community Credit Union and Growth Conference in Boston, Oct. 6-9. The entry deadline is Aug. 20. To submit an entry, use the link below or e-mail mmccrary@cuna.coop. For more information, use the link.

Delawares first biz loan from a CU not a bank

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NEWARK, Del. (7/20/10)--The very first small business loan in Delaware by way of the American Recovery and Reinvestment Act has been financed by a credit union. Gladys and Eustace Kamanja received a loan from American Spirit FCU, Newark, for a new business in Smyrna. The couple is taking over Excel Beauty Supply and is renaming the store "Queen Bee" (WDEL Talk Radio July 17). Gladys Kamanja had dreamed of owning a beauty supply, according to her husband Eustace. A certified public accountant, he had written a few business plans for others--but doing one for himself was challenging, said WDEL. American Spirit approved a $250,000 loan for their business. The loan is a “win-win” for both the Kamanjas and the credit union, according to Maurice Dawkins, president/CEO of American Spirit. He told WDEL that the credit union researched the business, talked to the owners, and decided that the business could be a “gold mine” because of the traffic in the area. The credit union anticipates the Kamanjas will be as successful as the previous owner, Dawkins added. The Credit Union National Association (CUNA) and credit unions are lobbying for an increase on credit unions’ member business lending caps--currently at 12.25%. An amendment introduced by Sen. Mark Udall (D-Colo.) to a budget stimulus bill would raise the caps to 27.5%. CUNA supports the amendment. American Spirit has $41 million in assets. To see the video, use the link.