NCUA: ‘Empty Returns,’ Not Regulatory Bias, Sunk Gambling-Backed CU

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WASHINGTON – Quoting a federal judge’s own words, lawyers for NCUA said last week that once the Department of Justice seized the main account at Vensure FCU, the credit union had no assets to cover its only line of business – processing billions of dollars in online poker bets.

“Accordingly, the NCUA Board acted appropriately in placing Vensure into conservatorship once the Trinity account was seized and frozen pursuant to a civil action in the United States District Court for the Southern District of New York,” lawyers for the Justice Department, who are representing NCUA in the case, told the federal court on Friday.

The lawyers rebutted arguments by Vensure lawyers that the $4.7 million Mesa, Ariz., credit union was planning to supplement the millions of dollars in income from its gambling business with loans, deposits and other traditional credit union activities, saying credit union officials had made those promises many times before but had never carried through.

But the most damning evidence submitted by the NCUA lawyers were statements made by U.S. Judge Rosemary Collyer in the final moments of a May 11 show cause hearing, when the judge questioned whether the credit union can support its claim that NCUA’s April 15 conservatorship was arbitrary and capricious and thus, illegal. NCUA seized the credit union hours after the Justice Department indicted 11 international gambling figures and froze $3 billion of their accounts in three dozen financial institutions, including $2 million held by Trinity Global Commerce in Vensure, which was used to process poker bets at the two biggest online gambling sites, and

At the hearing Judge Collyer said she believes NCUA gave the credit union ample notice of its concerns surrounding the gambling business and lack of a traditional credit union loan plan.

The judge said Vensure did not take precautions for the possibility of losing access to its main account. “I have to find [Vensure] did not read the tea leaves,” said the judge. “It didn’t take action, and then left itself terribly at risk if something should happen to its access to Trinity’s funds, which indeed happened.”

“It didn’t happen because of NCUA,” said Judge Collyer. “It happened because of criminal enforcement of investigation.”

“The business collapsed in a heartbeat,” said Judge Collyer. “Since there were inevitably and always empty returns as I’ve labeled them, meaning money handling that came back with insufficient funds, Vensure was left with the obligation to pay up on those and no access to Trinity monies, exactly the risk foreseen by NCUA and not previously experienced by Vensure.”

“I cannot find that NCUA on this record acted arbitrarily and capriciously or irrationally or unlawfully in putting this credit union into conservatorship,” the judge said at the hearing.

Despite her position, the judge gave both sides a final opportunity to state their cases in written briefs. A ruling in the case is expected as early as this week.


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