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Iowa Credit Union Plans

To Purchase Local Bank

IOWA CITY, Iowa-University of Iowa Community CU could become the first CU to buy a bank with a deal to acquire privately-held Hawkeye State Bank. The deal, which still requires final approval from state regulators and NCUA, is possible because UICCU is a community charter, eliminating any FOM issues, according to Jeff Disterhoft, president of the $300-million credit union.

Plans are to combine the bank's $160 million in assets and its two local branches with those of the credit union. "We would merge it into our operation and it would all be part of (UICCU)" Disterhoft told The Credit Union Journal.

The credit union became interested in the deal two weeks ago when the bank fired its longtime CEO, prompting it to approach the bank's sole owner, Russell Gerdin. Disterhoft said one of the attractions of the bank is its commercial services, "particularly on the deposit side." Terms were not disclosed.

Long Sentence Sought

WASHINGTON-Federal prosecutors asked a U.S. judge last week to assess the maximum prison term of up to 17 years against Bernard Gurr, the former manager of American Samoa Government Employees FCU, almost two years after Gurr's conviction on fraud and embezzlement charges and 10 years after the failure of the tiny Pacific island's only CU.

Held for two years in a suburban D.C. prison, Gurr faces up to 210 months in federal prison. The sentence is expected over the next two weeks, which will trigger Gurr's expected appeal. Under a plea bargain rejected by Gurr he could have faced a minimum three-year prison term and been out of jail by now.

NCUA officials testified, as they did during his three-week trial in March of 2000, that Gurr manipulated the books of the $9-million CU to hide the deterioration of the institution and loans made to cronies and family members.

NCUA liquidated the CU in 1994 at a cost of $4.5 million to the NCUSIF, one of the largest losses ever for the CU insurance fund.

Gurr has been held since 1999 when he was arrested stepping off a plane in Honolulu with hundreds of CU files hidden in his luggage. His trial was held in Washington, D.C., 5,000 miles from American Samoa, because Washington courts have jurisdiction over the tiny American territory.

NCUA Testifies

At last week's hearing, NCUA Supervisory Examiner Peter Steiger, then the problem case officer for ASGEFCU, testified that Gurr tried to end-run NCUA supervision in 1993 by brokering $2 million in non-member deposits to boost liquidity after being instructed not to do so. Steiger testified on the rapid deterioration of the CU in 1993, just before the NCUA takeover, when loan delinquencies soared from an already high 22% to more than 40% and non-member deposits rose to 77% of total shares, almost four times the legal limit.

By the time of the NCUA takeover in June of 1993 the ASGEFCU's unsecured loans had skyrocketed to $7.4 million, a staggering 70% of the loan portfolio. Steiger also testified that examiners discovered numerous loans Gurr made to himself and family members using Samoan names to hide their true identities. He said Gurr manipulated the credit union's books by generating the tellers' computerized reports himself, which detailed the financial records.

During cross examination, Joseph Conte, a public defender representing Gurr, pressed his case that the CU's high delinquency ratio was caused by the Samoan government's 20% reduction in hours and thus average pay in 1993, as well as the near-destruction of the island economy caused by two major hurricanes in 1991.

NCUA Liquidation Agent Max Peeples testified NCUA paid out almost $5 million to liquidate the CU, the largest payment of which was to pay off a $4-million loan to WesCorp FCU that was guaranteed by the NCUSIF.

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