WASHINGTON – Lawyers for Vensure FCU, the Arizona credit union processing millions of dollars in online poker bets that was taken under conservatorship April 15, on Thursday told a federal court NCUA is content to let the tiny credit union “wither on the vine” and self liquidate during the conservatorship.
The lawyers, arguing for the release of the $4.7 million credit union from NCUA’s hold, insisted that its main source of business, the processing of online bets, is legal and should not be a hindrance to the continuation of the credit union as a going concern.
NCUA has maintained the bet processing business is illegal under the Uniform Internet Gambling Act and because it is the credit union’s sole source of income and its elimination will render the credit union insolvent.
Both sides agree the Mesa, Ariz.-based credit union has expended virtually all of its capital during the four-week conservatorship and is on the verge of insolvency without its sole source of income during that time. During a hearing on the case last week, Elizabeth Whitehead, NCUA Region Five director in charge of the Vensure conservatorship, conceded the credit union’s dwindling assets, saying “this credit union is going to be insolvent in a couple of weeks.”
NCUA took over the credit union hours after the U.S. Justice Department indicted 11 international gambling figures for violating the Internet gambling statute and froze $3 billion of their funds in some three dozen accounts, including $2 million in a Vensure account. That account is owned by Trinity Global Commerce, a Canadian company that processes bets for the two biggest online poker sites, PokerStars.com and FullTiltPoker.com.
But the credit union’s case may be moot in a matter of days, as growing expenses continue to eat its capital, which was a robust $1.7 million, or 33%, the day NCUA took it over. Almost all of those funds have been expended since then and less than $150,000 is believed to remain.
“NCUA is now – by its own admission – essentially allowing VFCU to wither on the vine,” said the Vensure lawyers in legal documents challenging the conservatorship. “NCUA is not acting aggressively to see VFCU through temporary difficulties so that VFCU can continue to expand its operations and serve its members. Instead, NCUA is largely standing by while temporary difficulties unnecessarily destroy the substantial enterprise value VFCU had until the NCUA takeover.
“NCUA’s action in this matter,” argued the Vensure lawyers. “is an example of the deficient exercise of power for which serious judicial review is the only remedy. NCUA’s takeover should be declared invalid and enjoined, and control of VFCU should be returned to its rightful management forthwith – while there is still a possibility of truly conserving VFCU’s value.”
NCUA has seven days to respond to the credit union’s argument.
