WAUWATOSA, Wis. – A state court issued a $2.7 million judgment last week for U.S. Bank against Dick Jungen, the creator of Central States Mortgage who was fired as CEO of the mortgage CUSO last year.
U.S. Bank alleged in a November 2008 lawsuit that it provided a $3 million revolving loan to a separate company owned by Jungen, called Interim Funding, in February 2005. The bank claimed that Interim Funding defaulted on the note and owed $2.7 million plus interest.
Interim Funding, which was sued earlier this month by Central States, acted as a warehouse lender for originations made by Central States credit unions and other mortgage lenders, including U.S. Bank.
Central States sued Jungen and four other former executives of the CUSO on Feb. 2 for $15 million, claiming Jungen secretly controlled Interim Funding and manipulated the loan records to lump the credit union-owned company with risky and failed mortgages. Another alleged victim of the scheme is Members United Corporate FCU, which is expected to record tens of millions in losses on loans it provided through Central States.
Jungen founded Central States and sold a majority stake in the company to more than two dozen credit unions in 1997, but retained a minority interest and continued to serve as president and CEO. He was fired last June when the board discovered that he had a controlling interest in Interim Funding. Later his wife and two other executives with alleged ties to Interim Funding were also fired from Central States.
