Last-Minute Deal Settles U.S. Central Suit
BIRMINGHAM, Ala. – Lawyers for Corporate America CU and former executives and directors of U.S. Central FCU hammered out a settlement yesterday of a suit challenging the December 2008 conversion of $450 million of U.S. Central membership capital shares into Tier One capital that was wiped out within weeks as the one-time $52 billion corporate slid into insolvency.
The settlement comes just days before key figures in the U.S. Central failure were scheduled to testify in the suit, including CUNA President Bill Cheney, who sat on the board of U.S. Central at the time; Francis Lee, who was the CEO of U.S. Central; Joseph Herbst, who was both chairman of the U.S. Central board and president of Members United Corporate FCU; and David Dickens, U.S. Central’s head of asset liability management who was the only individual fired prior to the corporate’s failure.
The Alabama corporate claims the directors and officers of U.S. Central knew the capital would soon be consumed by growing losses when U.S. Central’s board, then NCUA, approved the conversion as part of the regulator’s failed effort to staunch the decline in U.S. Central’s Wall Street ratings, and to enhance its dwindling borrowing capacity. The $450 million was erased just six weeks later when U.S. Central reported a $1.2 billion loss. The corporate was taken over in March 2009 by NCUA, which has been liquidating its assets since then.
Terms of the settlement were not immediately available but the deal cancels next week’s scheduled trial where some of the causes of the biggest failure in credit union history were expected to be bared. Lawyers for Corporate America did not respond to phone calls seeking comment.
The failure of U.S. Central erased $3.4 billion of capital held by U.S. Central’s 27 corporate members and is projected to cost more than $5 billion to resolve.