Sentencing Rescheduled, Other Claims Are Settled
NEWARK, N.J.-A federal court rescheduled last week's sentencing for U.S. Mortgage President Michael McGrath in the $140 million fraud at CU National Mortgage until April, when the one-time mortgage executive is expected to be given a long prison sentence.
Prosecutors and McGrath have agreed to a sentence of 12 to 20 years in prison, according to sources familiar with the case. The sentence must be accepted by the judge.
Meantime, two more of the 28 credit unions defrauded in the scheme - TCT FCU in Ballston Spa, N.Y., and Velocity Community CU in Palm Beach Gardens, Fla.-have settled their claims with Fannie Mae, which bought their mortgages from McGrath under false pretenses. That makes at least three credit unions that have settled with Fannie, as they join Educational Systems FCU in Maryland.
But several other credit unions - some with large claims - are vowing to continue to contest the ownership of their mortgages with Fannie Mae. "We will not be getting out that cheap," James Forte, a New Jersey attorney representing Picatinny FCU in Dover, N.J., told Credit Union Journal last week. Picatinny claims that Fannie Mae owes it more than $14 million from the sale of mortgages CU National held on its behalf to Fannie Mae and has filed suit over the claim.
Several of the credit union victims, including TCT and Educational Systems, are suing CUNA Mutual Group, which they hope will make up the difference between their total losses and a settlement with Fannie Mae through an insurance claim. CUNA Mutual has filed its own suit against 23 of the credit unions seeking a declaratory judgment that it is not responsible for losses related to the massive fraud. McGrath last June pleaded guilty to selling as much as $140 million of credit union mortgages to Fannie Mae without the credit unions' authorization and keeping the money. Under his plea agreement, McGrath has agreed to forfeit about $13 million in assets. He apparently lost the remaining funds in the stock market, leaving as much as $125 million of credit unions funds missing.
WA CUs Win Public Deposits
OLYMPIA, Wash.-This state's credit unions won a major fight with passage of a bill that will give them access to billions of dollars in municipal deposits. Starting July 1, 2011, the state's 70 credit unions will be added to the list of financial institutions that can hold public funds from city and town governments, school districts and other public entities. Credit unions will be allowed to accept up to $100,000 from each public entity. Previously, only banks had access to the almost $6 billion deposited in 80 institutions.
The legislation was opposed by the Washington Bankers Association. Jim Pishue, president of the state lobby group, said banks wouldn't mind CUs holding public deposits, as long as they are required to pay the same amount of state taxes. The Washington league supported the legislation.
Unique Stored Value Card
RALEIGH, N.C.-State Employees' CU plans to roll out a stored value Visa card product later this month that will make it impossible for users prone to overdraft to spend more than they have. The credit union's Cash Points Global Card, which SECU is using to replace its traveler's checks, followed a new text messaging scheme introduced March 1 that notifies members when they have committed an overdraft on one of their accounts.
Corrections & Clarifications
* A photo in the March 8 edition of CU Journal was incorrectly attributed to Blackhawk Community CU.
* An incorrect photo of Timothy Dwyer of Entitle Direct appeared in the March 1 edition in conjunction with Mr. Dwyer's opinion piece. A correct photo appears here.
