Price Tag Of MBL Fraud At AEA FCU Put At $58 Million

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YUMA, Ariz.-Authorities sifting through fraud charges against the former director of business lending at AEA FCU are estimating the scheme will cost the one-time $410 million credit union almost $58 million, pushing the credit union to the brink of insolvency and making it one of the biggest credit union frauds in recent years.

The latest estimate comes in a civil suit challenging the bankruptcy of William Liddle, former vice president of business services at the one-time Arizona Education Association credit union, and his wife, Rhonda Liddle. The two filed for bankruptcy last year and subsequently were charged in a federal indictment with a scheme to approve millions of dollars in MBLs in exchange for more than $1 million in kickbacks.

The scheme forced NCUA last month to take over the troubled credit union, which reported losses of $4.4 million for 2009 and $4.7 million for the first three quarters of 2010, but is expected to show much bigger losses once year-end financials are reported in the next few days.

Anatomy Of A Fraud

According to a federal grand jury, Liddle, hired at the credit union in 2004, approved 50 member business loans totaling more than $22 million to local businessman Frank Ruiz between March 2005 and when Liddle was fired from the credit union in November 2009. Ruiz also was charged in the scheme.

In return, Ruiz, owner of Desert Best Distributing, Desert Best Technologies, Desert Best Enterprises and the Yuma Fun Factory, among others, funneled more than $1 million back to the Liddles, including $565,000 to buy a home, a membership at the Yuma Country Club, $40,000 to buy a Toyota Sequoia, $9,600 to buy a Corvette and $246,200 in cash, the grand jury alleges.

All of Ruiz's business ventures funded by the AEA loans, including the Yuma Fun Factory, ended in bankruptcy. More than $25 million in AEA loans Liddle authorized during this conspiracy remain in default. All three defendants recently declared personal bankruptcy as well.

But a greater scope of the fraud is emerging in charges filed with the U.S. Bankruptcy Court in Arizona by CUNA Mutual Group, which stands to lose millions by paying off a bond held by the credit union. Because of its payments to the credit union, CUNA Mutual's CUMIS Insurance Society unit has acquired all claims against the Liddles. The Liddles and Ruiz are scheduled to stand trial this May.

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