NEWARK, N.J. – Sperry Associates FCU became the fourth credit union to sue CUMIS Insurance Society seeking to block the credit union’s efforts to prevent bond coverage in the $140 million U.S. Mortgage/CU National Mortgage fraud.
As in the previous three suits, the Long Island credit union is asking the courts to reject a bid by CUMIS, a unit of CUNA Mutual Group, for a declaratory judgment that the fraud losses are not covered by the bond held by Sperry Associates FCU.
The $360 million credit union lost about $9.5 million when CU National President Michael McGrath sold its mortgages to Fannie Mae without authorization and kept the credit union’s funds. Sperry Associates’ suit came a day after a suit filed by Suffolk Employees FCU, which lost $42 million. At least two other victims of the fraud, Educational Systems FCU and TCT FCU, have filed similar suits seeking to block the CUMIS bid.
Sperry Associates also has filed suit against Fannie Mae in its efforts to recoup the losses. CUMIS said last week it believes the Fannie Mae fraud is not covered under the bond issued to these credit unions.
McGrath has pleaded guilty to fraud and is scheduled to be sentenced on March 22.
Twenty-six credit unions have claims outstanding in the case.
