IRONDALE, Ala. – Corporate America CU filed suit in state court this week against officers and directors of U.S. Central FCU claiming securities fraud in the sale of so-called paid-in-capital II. to U.S. Central’s corporate members.
The suit claims that the individuals, including U.S. Central President Francis Lee, and top investment officers David Dickens and Kathy Brick, worked to conceal $1.2 billion in losses U.S. Central conceded in January of this year, after claiming for months losses were much lower. Since then, losses have quadrupled for 2008, to $4.9 billion.
The suit claims the officers and directors either knew or should have known when U.S. Central converted $450 million of membership capital shares last December to PIC II that the PIC II was to be extinguished soon thereafter when the $1.2 billion of losses came to light. The $2 billion Alabama corporate is seeking $9 million in damages, equal to the amount of PIC II it lost.
Also named as defendants in the suit are: Joseph Herbst, the then-chairman of the U.S. Central board and president of Members United Corporate FCU; and fellow directors Charles Thomas, David Brehmer, Robert Siravo, Larry Eisenhauer, James Hansen, Greg Moore, Bill Cheney and John Franklin.
Lee and Dickens, as well as all of the directors were removed by NCUA after the federal agency took U.S. Central under conservatorship on March 20. Brick still serves as chief financial officer of U.S. Central.
