YUMA, Ariz. – AEA FCU, taken over by NCUA amid a member business loan scandal, on Friday was hit with a $34 million lawsuit by a local developer claiming the credit union unfairly sued him for collection of his capitalized loan and cut off his line of credit.
These actions, charge Todd Burch, drove him into bankruptcy, damaged his credit and impacted his ability to do business as the developer of the Tuscan Ranch housing subdivision and the Reflections condominium project.
AEA, the one-time Arizona Education Association credit union, was taken under conservatorship by NCUA in January after the former head of member business lending was charged with accepting more than $1 million in kickbacks in exchange for approving tens of millions of dollars in MBLs that eventually failed. The scheme is projected to cost the one-time $410 million credit union as much as $58 million in losses.
Burch’s lawsuit states AEA fraudulently misrepresented to him that if he entered into a good-faith banking relationship with the credit union, the financial institution would provide Burch with “sufficient funds to implement the business purposes of the loans.”
However, according to Burch’s lawsuit, “Defendant AEA’s balance sheet was insolvent as of June 30, 2006” and had exceeded its regulated loan limits.
Because of this alleged deception, Burch said he changed banks from Yuma Community Bank to AEA. As a direct result, Burch’s lawsuit states, he was “damaged personally and in every other respect in an amount of not less than $34 million ...”
Burch filed for bankruptcy in the spring of 2010. That includes the personal bankruptcy of Burch and his wife as well as his entities, Tuscan Ranch Inc., Cactus West Developers, Todd Burch Limited [his business] and Nflux LLC.
Burch said he had tried for 18 months to make a deal with AEA to “in essence change banks so I could move on with the projects. Those efforts all failed despite the fact that they would have net AEA similar percentages as the sales of the Fun Factory and Lee Hotel.”
