FORT MYERS, Fla. – A federal court denied a motion by NCUA to dismiss claims from real estate investors all over the country alleging they were duped by now-defunct Huron River Area FCU into buying speculative real estate plots in southwest Florida.
The court, following an oral argument Aug. 22, ruled the members have raised valid arguments about the relationship between the one-time $360-million Michigan credit union and a third-party developer called Construction Loan Company that helped sell the get-rich-quick real estate speculation in the projects, known as Lehigh Acres and Cape Coral.
Huron River Area was one of three credit union failures tied to the two real estate developments, which promised investors double-digit returns for the guaranteed sale of homes not yet built. The other two failures, Colorado’s Norlarco CU and New Horizons Community FCU, cost NCUA tens of millions of dollars to resolve. The three credit unions agreed to lend funds to real estate investors all over the country despite questions regarding the investors’ eligibility for membership.
NCUA has inherited hundreds of homes and undeveloped plots in the two Florida developments near Fort Myers because of the three failures and is fighting in the courts to foreclose on dozens more, including the property involved in this suit.
In their suit, borrowers from California, Maryland, Massachusetts, Tennessee, Florida, Illinois, Texas and Michigan claim they were fraudulently allowed membership in the Ann Arbor, Mich., credit union to qualify them for construction loans. They claim the credit union violated its fiduciary duty to them by engaging in double dealing with the construction company and appraisers.
The defendants in the suit are NCUA and Whitney Education Group, which sold the get-rich-quick real estate speculative scheme to investors across the country through its “Millionaire University” program. Under the program, enrollees were sold undeveloped plots in the two developments that were purported to be pre-leased, and promised a return of more than 14% in a year’s time.
