Unaffiliated Non-Profits Provided Backdoor Membership to Norlarco CU

FORT COLLINS, Colo. – Authorities believe hundreds of investors in speculative Florida real estate ventures qualified for membership in at least one of three failed credit unions by joining unaffiliated non-profits that served as select groups. Some of the investors were able to join Norlarco CU by paying nominal membership fees to Rocky Mountain Bird Observatory, Boy and Girls Club of Larimer County, or Legacy Land Trust, according to Chris Myklebust, commissioner of the Colorado Department of Financial Services. Norlarco was one of at least three credit unions–the others are Huron Rivera Area FCU and New Horizons Community FCU–that failed after lending hundreds of millions of dollars to speculative real estate investors throughout the east coast. Hundreds of the investors, from as far away as Massachusetts, New York, New Jersey, Georgia and Maryland, have filed suit alleging fraud in the sale of the Florida Gulf Coast properties, known as Cape Coral and Lehigh Acres. All three of the credit unions were taken over by NCUA. The bust of the Florida developments threatens to grow into one of the biggest failures in credit union history, with the three failed institutions holding more than $500 million worth of loans to the two projects and dozens more credit unions holding loan participations. Myklebust said last week he is concerned about the status of Norlarco CU after reports of a secret, three-month conservatorship emerged, saying members have accelerated withdrawals since then. "It was business as usual up until about a week ago, when the news media got wind of it," he told The Credit Union Journal. Meantime, real estate delinquencies for Norlarco jumped 25% last month, to $70 million, compared to just $1 million a year ago.