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Borrowers sue over Huron River real estate deals

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TAMPA, Fla. (9/16/09)--Twenty-eight borrowers from nine states filed a lawsuit Sept. 9 in a U. S. District Court in Tampa, Fla., against Michigan-based Huron River Area CU and several real estate venturers over Florida speculative land deals that contributed to the failures of Huron River, and Norlarco FCU and New Horizons Community FCU. Also named in the suit is Huron River's liquidating agency, the National Credit Union Administration (NCUA). NCUA assumed control of the credit union in February 2007 and liquidated it the following November. It is in the process of trying to collect on loans made by the credit union in the undeveloped Cape Coral and Lehigh Acres projects in Florida. Those developments went bust when the real estate market bottomed out. Among the defendants are Russ Whitney and his firm, the Whitney Education Group, which conducts real estate investment seminars throughout the U.S. under the name "Millionaire University" (MU); Michael O. Kane and Gulfstream Realty; United Mortgage; the Construction Loan Co. (CLC) and other partners. The suit alleges that the defendants worked together in an enterprise to sell, develop, finance, market and manage Florida real estate to and for MU students, who were the targets of the fraud. CLC acted as Huron River's agent for a Florida construction loan program and would close the construction loans and attempt to assign each loan to the credit union. The assignments were allegedly "illegal and void because the plaintiffs were not legal members of Huron River Area CU," according to the complaint filed. The plaintiffs are from California, Florida, Illinois, Maryland, Massachusetts, Minnesota, Michigan, Tennessee and Texas. The case is similar to a lawsuit filed by nearly 60 borrowers in a Circuit Court in Florida, now in U.S. District Court in Ft. Myers, Fla. That suit was filed on July 31, 2007, against both Huron and Norlarco. Although the plaintiffs are different, both sets of plaintiffs are represented by the same law firm, Conwell Kirkpatrick of Tampa, Fla., and many of the allegations are identical. In both cases, plaintiffs alleged violations of the Racketeer Influenced Corrupt Organization (RICO) Act. In July, the Department of Justice, representing NCUA in the case, filed a motion for sanctions against the lawyers and plaintiffs of the earlier lawsuit, asserting that the plaintiffs' RICO claims against Huron River Area CU "had no evidentiary support." No rulings have been made on the sanctions motion. Plaintiffs in the new lawsuit also present as evidence for their arguments a copy of the NCUA Office of Inspector General's Nov. 26, 2008, Material Loss Review of the Huron River Area CU. The report analyzes why the credit union failed and concludes the credit union:
* Did not exercise due diligence by evaluating the third-party relationship held with its lender, CLC; * Allowed CLC to concentrate a majority of the credit union's loan portfolio in the speculative Florida real estate construction project; * Allowed CLC to make construction loans to applicants outside the credit union's approved field of membership; * Misclassified construction loans and violated NCUA's Member Business Loan limits; * Did not have adequate liquidity controls in its asset liability management policy; and * Failed to develop or follow adequate plans to guide the direction of the credit union and the Florida construction loan program.
The report also said management of the credit union was not forthcoming with examiners about the construction loan program and may have ignored warnings regarding the expected decline of housing values, especially those in the Florida market. In the earlier lawsuit, NCUA presented a D'Oench Doctrine argument--that federal common law and the Federal Credit Union Act bar suits and recoveries of this type against NCUA when it is acting as the liquidating agent of a federally insured credit union. On Sept. 3, the judge gave the plaintiffs and defendants 11 days to present the status of their mediation efforts from the case filed in 2007. No ruling has been made yet. In the latest suit, the plaintiff borrowers ask for a jury trial; for the court to declare their loans held by the liquidating agent as illegal and void; and for a judgment that NCUA has no standing to enforce the terms of the loans.

Refinancings boost Georgia CUs loan portfolios

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DULUTH, Ga. (9/16/09)--Georgia credit unions saw a boost in lending, largely due to refinancings, during the first six months of 2009, says an article in The Atlanta Journal-Constitution (Sept. 14). Credit unions in the state reported $2.1 billion in loans originated during the first half of the year, compared with $2 billion for the first six months of 2008. The number of loans dropped slightly but the average loan size rose. Mike Mercer, president/CEO of the Georgia Credit Union Affiliates, said that much of the new business was generated from homeowners refinancing their mortgages. He told the publication the league was "pleasantly surprised that originations have been as good as they have." The article noted that loan volume growth has slowed, and earnings are down by about 50% across the board, with about one-fourth of the state's 168 credit unions reporting a loss over the period. Mercer told the newspaper that credit unions' deposit levels have shot up faster than money can be lent out. Credit unions are parking cash in overnight or short-term investment accounts, which earn far less than the 1% to 2% returns paid on the deposits, and that eats into the credit unions' earnings. Deposits are up about 16% over the same period last year because members are keeping money in their accounts rather than spending or investing. While credit unions' loans were up, the state's banks loan volume dipped slightly, to $207 billion at the end of June. That compares with $214 billion in June 2008.

Auto lending helps Michigan CUs gain popularity

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LANSING, Mich. (9/16/09)--Michigan credit unions saw an 8.5% increase in new auto loans during second quarter, says the Michigan Credit Union League, citing data from the National Credit Union Administration. The increase equals $2.2 billion in auto loan balances as of June 30--a 32% increase in new-vehicle loans over June 2008 (Michigan Monitor Sept. 14). "More than 200 credit unions statewide have stepped in to fill the void in auto lending," said league President/CEO David Adams. "Credit unions are financially stable, increasing members' savings deposits, and supporting their members and Michigan's auto companies by making the loans that put new and used cars on the road," Adams added. He cited credit unions' "Invest in America" program, which "has strengthened credit union relationships with auto dealers and shown the importance of buying American." Used-car loans increased 14% over the period, and small business loans grew about 17%. That momentum continued into the third quarter of 2009, with the state's credit unions increasing their market share of new- and used-car loans from 23% July 31, 2008, to 36% on July 31, 2009. This is the highest market share increase of the 20 most populous states, the league said. On Tuesday, the Oakland Press featured the statistics and Adams' comments, as well as a comment from Claudia York, CEO of Chief Financial FCU, Pontiac, who noted the increase in business in both new- and used-car loans.

PCUA board approves five policies

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HARRISBURG, Pa. (9/16/09)--The Pennsylvania Credit Union Association’s (PCUA) board of directors Friday approved five policies during its Fall Leadership Conference. The association reaffirmed its existing policy to fully defend any adverse tax ruling at all costs--at federal, state, or municipal levels--through the courts or the legislature. The board voted to modify the association’s partnership with the Credit Union National Associations (CUNA) to broaden its education programming. PCUA will continue to promote CUNA education products and services where appropriate (Life is a Highway Sept. 15). The board also voted to continue its iBelong credit union awareness campaign, basing assessments on a three-tier funding option for credit unions that stipulates:
* Less than $20 million in assets--0.10 basis points; * $20-$50 million in assets--0.40 basis points; and * Greater than $50 million in assets--0.60 basis points.
This will result in nearly all credit unions seeing a decrease in their iBelong assessments, PCUA said. The board also approved increased membership fees for all asset categories over $100 million by $1,000 per asset category. Finally, the board agreed to a one-time free trial membership for non-affiliated credit unions, from Oct. 1 through Jan. 31.

Scammers access energy companys account client info

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BRUNSWICK, Maine (9/16/09)--Eastern European scammers used a sophisticated e-mail scam to gain access to a Brunswick, Maine, heating fuel company’s bank account it uses to allow customers to pay for fuel with electronic funds transfers from their checking accounts. The scam has implications for credit unions. The breach of Downeast Energy and Building Supply’s account cost the company roughly $150,000 and exposed checking account information of hundreds of customers, the company said Monday ( Sept. 15). The scam began with an e-mail to a Downeast employee that claimed to be from the company’s bank. An e-mail link that seemed to be from KeyBank took the employee to a bogus website that was identical to the bank’s, the publication said. Once the company’s bank-issued user name and password were entered, the information was delivered to the scammers who then used it to steal money from Downeast, MaineBusiness said. Internet criminals are stepping up their targeting of small- and mid-sized companies because they have less sophisticated security than larger companies, a Federal official told the publication. About 87% of data breaches could be thwarted with simple-to-intermediate preventive measures, said a Department of Homeland Security official. Cybercrime has cost the nation nearly $8 billion, U.S. Sen. Susan Collins (R-Maine), ranking member of the Senate Homeland Security and Governmental Affairs Committee, told the committee. Data relating to more than 130 million credit and debit cards have been stolen from corporations, the publication said.

Hampel to IBizWeekI Why inventory is hard to finance

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LOS ANGELES (9/16/09)--Inventory financing will be one of the most difficult things to obtain this year, according to the Credit Union National Association’s (CUNA) chief economist. Inventory financing is hard to get because inventory is basically useless, Bill Hampel told BusinessWeek Friday. “Inventory is, by definition, self-liquidating, extinguishing collateral because if the business does not sell the vast majority of its inventory, it’s essentially worthless,” Hampel said. “For a lot of business lenders, inventory financing is essentially viewed as unsecured lending.” BusinessWeek’s article noted that Josh Lipton, owner of, had received a $32,000 revolving line of credit from Bank of America. BofA cut the line in half this summer. Lipton said he used the credit during the slow season last fall, but paid it off in full in spring. After he paid off the line of credit, he received a note from Bank of America saying he did not qualify anymore for that large of a credit line.

Pittsburgh CUs prep for G-20 Summit impact

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HARRISBURG, Pa. (9/16/09)--The Pennsylvania Credit Union Association held a conference call Monday with credit unions in the Pittsburgh area to discuss preparations for operations during the Group of 20 (G-20) Summit, which will be held Sept. 24-25 in Pittsburgh. The G-20 Finance Ministers and Central Bank Governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy. The credit unions shared information and plans. Most of the credit unions are closing or having limited hours during the event. Sandy Shenk, Pennsylvania Credit Union Service Centers Inc. state coordinator, discussed how shared branching really helps during situations such as the G-20 Summit. Nine credit unions participated in the call (Life is a Highway Sept. 15):
* A-K Valley FCU, Lower Burrell; * AT&T Employees Pittsburgh, Pa. FCU; * Clearview FCU, Moon Township; * City Co FCU, Pittsburgh; * Financial Advantage FCU, Homestead; * Pittsburgh Firefighter’s FCU; * P A T A FCU, Pittsburgh; * riverset CU, Pittsburgh; and * Tri-Point FCU, Pittsburgh.

GM expresses appreciation to CUs outlines plans

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LANSING, Mich. (9/16/09)--Management officials at General Motors expressed appreciation for credit unions and their "Invest in America" auto-sales incentive program during a conference call Monday. Mark LaNeve, vice president of sales and marketing for GM North America, told more than 100 credit unions on the call that "Invest in America" is not just a program GM considered when credit was tight, but a critical partnership for the newly restructured automaker. He outlined GM's plan for moving forward and how credit unions fit into that plan. CUcorp CEO David Adams also spoke during the call, describing the partnership as a catalyst to how business can be done in today's economic environment. CUcorp is a service corporation of the Michigan Credit Union League. "This is another positive example of how today's economic climate is creating unprecedented opportunities for credit unions and their members," Adams said. LaNeve explained that 60% of credit union members who requested a GM authorization code for a discount are purchasing the vehicle. The normal rate is about 15% to 20%, and he expressed satisfaction with the credit unions' statistic. LaNeve also pointed out that 66% of credit union members buying a GM vehicle is either a new GM customer or returning after using another company. Credit unions had an opportunity to ask questions directly with GM and give senior management an idea of how the program worked from the credit union perspective. "This meeting was likely the first time that General Motors Corp., the venerable powerhouse in the auto industry, has had a dialogue with some of the largest credit unions in the nation about a partnership," said Adams, adding that CUcorp is committed to being a catalyst for partnership between credit unions and GM. So far, more than 190,000 vehicles have sold under the "Invest in America" program, with credit unions financing more than 150,000 of the sales. This has resulted in new credit union loans of about $3 billion, said CUcorp.

IUSA TodayI Stashing cash Try high-yield CU account

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NEW YORK (9/16/09)--USA Today Tuesday suggested that consumers look to credit unions as a place to stash their cash. Consumers are spending less and saving more, but they should put their money in a place where it can earn interest. The article suggested consumers look into rewards checking accounts with interest rates of 4% or higher, which are offered by some credit unions and banks (USA Today Sept. 15). It also suggested placing emergency funds in a credit union account as opposed to a money market account, which allows consumers to put money they’re planning to invest in stocks or mutual funds. The advantage of placing money in a high-yield account is liquidity--which means consumers can withdraw their money at any time without penalty. “It you’re looking for a place to stash your emergency savings, a high-yield bank or credit union account is a better choice,” the article said. USA Today also reminded readers that deposits in credit unions are backed by the National Credit Union Administration up to $250,000.

Series on CUs appears in Arizona biz mag

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PHOENIX (9/16/09)--Arizona Business Magazine this month published a series of six articles, including three profiles, on Arizona credit unions and their employees. The individuals profiled by the magazine were: Mary Marshall, retired CEO of Alhambra CU, Phoenix; Pat Bodnar, senior vice president of the Arizona Credit Union League; and Robert Ramirez, president/CEO of Vantage West CU, Tucson. The magazine noted:
* Marshall’s commitment to credit unions after a credit union provided needed support to her family when she was growing up; * Bodnar’s enthusiasm for her job at the Arizona league. “I fell in love with credit unions and their philosophy,” she told the magazine; and * Ramirez’s promotion to acting chief financial officer after one day on the job. Six months later, he was challenged to turn around the credit union’s finances. Three months after that, he fulfilled the task and was promoted to chief financial officer.
Arizona Business Magazine also noted the transformation of the Arizona League throughout the decades, Arizona credit unions’ outreach efforts to small businesses, and the league’s partnership to help credit unions in Antigua. To read the full articles, use the link.

CU System briefs (09/15/2009)

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* HONOLULU (9/16/09)--A credit union has apologized to members after sending letters to them with their account numbers displayed on the envelope. Hawaii State FCU said no harm can be done because the account number wouldn't be enough to access an existing account or open a new one. As a test, a local television station took one member's name, address and account number, and tried to create an online account. But since it didn't have her Social Security number, it couldn't open a new account, said the station. The credit union said that members will not be liable for any unauthorized access to their accounts and advised members to monitor their accounts as a precaution ( Sept. 14) … * ALEXANDRIA, Va. (9/16/09)--More than 225 members of CommonWealth One FCU showed their support Aug. 28 for H.R. 3380, the Promoting Lending to America's Small Business Act. The bill--introduced by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.)--would raise the cap on member business lending (MBL) to 25% of assets from 12.25% and raise the minimum threshold for a loan to be considered an MBL. The credit union's Legislative Awareness Day at each branch informed members about the bill. Staff used the Website to help members write their congressional representatives. The credit union will absorb the cost of mailing the letters. "It's great to see members come out and show their support for the credit union movement and exercise their roles as a member-owner," said John R. Blair, president/CEO of the $288 million asset credit union … * INDIANAPOLIS (9/16/09)--Mildred "Millie" South Cox, 69, former Indiana Credit Union League vice president of governmental affairs, died in her sleep Friday, according to the league. Cox was a league employee for 26 years, serving in the governmental affairs position from 1986 until retiring in 2003. That year she was recipient of a Sagamore of the Wabash Award from the late Gov. Frank O'Bannon; a special resolution adopted by the Indiana General Assembly honoring her dedication and efforts on behalf of credit unions; a special resolution read into the Congressional Record by her friend, U.S. Rep. Dan Burton; a resolution adopted by Indiana's credit unions at the 2003 League Annual Meeting, and a national credit union award at the Credit Union National Association's (CUNA) Governmental Affairs Conference (GAC) in 2004. The Indiana Credit Union Foundation established the Millie Cox Scholarship Award, which has helped recipients attend the CUNA GAC each year. "Millie was a tireless advocate, leader, and champion of credit unions throughout her career with the league. Her work in national political circles as well as at the Indiana Statehouse had a very positive impact and will continue to benefit credit unions for years to come," said John McKenzie, league president. She is survived by one son, three sisters, and two brothers. A celebration of her life will be today at 2:30 p.m. at Flanner and Buchanan Funeral Center, Washington Park East, Indianapolis. Visitation will start at 1:30 p.m. * ALBANY, N.Y. (9/16/09)--Alfred J. Mariani, former manager/CEO of Syracuse University FCU and former national director of the Credit Union National Association (CUNA), died Monday. He joined the credit union movement during the late 1940s, serving as treasurer of both Oneida FCU and Bendix FCU before becoming a field representative for the Syracuse chapter of the Credit Union Association of New York. Mariani served in that position for 14 years, organizing more than 100 credit unions from Binghamton to Massena and nurturing them. He also served as association volunteer; president, director and first vice president of the Syracuse chapter; and director-at-large. Mariani also was a founding member of Members United Corporate FCU and a member of CUNA Mutual's Policyowner's Board. He was the association's first two-term president/chairman and was inducted into the New York Credit Union Hall of Fame in 2008. Mariani is survived by one son, one daughter, two sisters, six grandchildren and three great-grandchildren … * ALBANY, N.Y. (9/16/09)--Richard K. Moore, chairman of Reliant Community FCU, died Sunday, according to the Credit Union Association of New York. Moore joined the credit union's board in 1985 and served as board chairman from 1986 until his death. Moore was also a member of the credit union's Supervisory Committee and was active in the National Association of Credit Union Chairmen. In 1997, he received the Certified Credit Union Director designation from the Credit Union Executives Society. Moore was inducted into the 2009 New York Credit Union Hall of Fame last month. He is survived by his wife, two sons, five grandchildren and a sister …