PHOENIX – A federal court yesterday denied a Yuma real estate developer’s $34 million breach of contract suit against NCUA and rejected his bid to block the credit union agency from selling off his projects, which were financed by the scandal-plagued AEA FCU.
Todd Burch, developer of the Tucson Ranch housing subdivision and the Reflections condominium project, said he was coaxed away from Yuma Community Bank to the one-time $410 million credit union with false promises by William Liddle, head of member business lending at AEA who was convicted last month of a massive MBL fraud.
Burch claims the credit union cut off his line of credit and sued him for collection of his loan in breach of promises made by Liddle as the state’s real estate crisis was peaking, driving him into bankruptcy. The developer argued the AEA loans themselves were illegal and unenforceable because they violated the Federal CU Act’s limits on loans to one borrower, which are 10% of the "credit union's unimpaired capital and surplus.”
Burch said AEA did not cut off his credit because the developer was failing but because the credit union itself was failing.
Liddle pleaded guilty last month to approving tens of millions of questionable MBLs in exchange for bribes of cash, cars and a home in a scheme that left the credit union insolvent. NCUA took the one-time Arizona Education Association credit union under conservatorship in December 2010. The credit union had negative net worth of $14 million at year-end and was only operating because of a $20 million emergency NCUA loan.
In dismissing the developer’s suit, the U.S. District Court for the District of Arizona, rejected Burch’s claims that AEA—now NCUA as conservator--is accountable for Liddle’s promises to Burch, including continuing to fund his million-dollar projects.
NCUA said Burch’s claims are founded on two alleged promises made by the Liddle, including that AEA would continue to loan Burch the needed funds, and second, that AEA was solvent. The availability of funds, noted NCUA, was based on whether AEA had the funds to lend, and it did not, they told the court. “This is an oral promise to lend money in the future, which is unenforceable against the NCUA,” said the agency.
The court also issued an order erasing Burch’s attempts to bloc NCUA’s sale of several of the disputed properties through notices of lis pendens on three homes, the Reflections condominiums and vacant land and the property was subsequently sold—back to AEA in a foreclosure sale.
