FDIC APPROVES UNITED FCU'S PURCHASE OF SAVINGS BANK
WASHINGTON-The FDIC approved the acquisition of Griffith (Indiana) Savings Bank by United FCU of St. Joseph, Mich., the first bank to be acquired by a credit union.
The deal has already been approved by NCUA and is expected to be completed by year-end. United, with $1.3 billion in assets, plans to continue operating the $81-million bank's single branch. The acquisition of 73-year-old bank is being constructed as a so-called purchase and assumption because of its declining financial condition.
In order to facilitate the unprecedented deal, United FCU, has had all depositors in the troubled Indiana S&L join the American Consumer Council. The San Diego-based consumer group boasts more than 100,000 members in 44 states, with 22 credit unions-including United FCU-offering free membership in the council as a select group.
United, the one-time Whirlpool Employees CU, has a recent history of acquiring troubled institutions, including the 2009 deal for Clearstar Financial CU, a one-time $175 million Reno, Nev., credit union failure.
COURT CLEARS DIRECTORS IN NEW LONDON SECURITY FRAUD
BRIDGEPORT, Conn.-A federal court here dismissed a civil suit brought against volunteer directors of New London Security FCU over the 2008 failure of the $13-million credit union after its elderly investment manager leaped to his death hours after NCUA discovered he had stolen the vast majority of the CU's funds.
In granting the directors' motion for summary judgment, U.S. Judge Warren Eginton ruled the state's statute on joint and several liability for third-party negligence does not apply in this case, where the directors are being sued by Wells Fargo, which itself is being sued by NCUA for $10 million of losses on the spectacular failure. Wells Fargo is the successor to A.G. Edwards, where the 82-year-old investment manager implicated in the fraud, was employed until his suicide.
The investment manager, Edwin Rachleff, a former director of the CU, jumped to his death from the eleventh story of a nearby building on July 28, 2008, hours after NCUA took over the CU when it discovered that Rachleff had fabricated the investment records and had stolen some $12 million. NCUA eventually paid out almost $10 million to insured members, which it is trying to recoup in its suit against Wells Fargo.
Wells Fargo, in turn, sued the directors and cited an internal NCUA report that concluded the directors failed to act on numerous examination reports on shortcomings on their oversight of its outside investment manager. The 2009 report by the NCUA Office of the Inspector General faulted the board for not following procedures to operate a federally chartered credit union, for allowing Rachleff "run of the house," in choosing, handling and overseeing New London Security's investments, for ignoring clear and specific warnings about risk, and for failing to remedy deficiencies in previous audits.
Directors of the 72-year-old CU, chartered to serve members of the neighborhood Jewish affinity club, named in the suit were: Herb Linder, its chairman; Martin Yavener, vice chairman; Hinda Kimmel, treasurer; and Rueben "Rip" Levin and Martin Lazarus.
Separately, a group of New London Security members who lost almost $4 million of uninsured deposits in the failure have dropped their suit against NCUA seeking to recover their losses.
NCUA paid out almost $10 million to New London Security members but denied claims for anything over $100,000 per account, which was the legal limit on federal deposit insurance coverage at the time. The limit has since been increased to $250,000 per account.
Lawyers for the uninsured depositors did not return a phone call seeking comment.
TEXAS BANK BUY SOLVES CEO SUCCESSION FOR CU CONVERT
PLANO, Texas-ViewPoint Bank, previously Community CU, announced it is acquiring $500-million Highlands Bancshares in a deal that will both expand its branch network and replace its CEO Gary Base, the former CU figure who is retiring after 25 years.
The deal will give the $3-billion ViewPoint, which is the biggest credit union convert to switch to a bank, six additional branches in its North Texas market, as well as a successor to Base, the one-time chairman of the state's Credit Union Commission who engineered the conversion. ViewPoint said Kevin Hanigan, the president of Highland, will become president and CEO of ViewPoint.
Base said that Hanigan is the right fit for ViewPoint as it transitions from a thrift to a commercial banking charter. ViewPoint has received approval to switch charters to a commercial bank and said that the conversion will become official on Dec. 19.
Community CU's 2006 conversion to bank, along with that of nearby OmniAmerican CU at the same time, caused great consternation among credit unions and was only completed after a federal court in Texas ruled NCUA had overstepped its authority in trying to block a member vote on the charter switches by both credit unions. Base's conversion created particular anguish because he was a long-time leader in the Texas credit union movement and was the head of the state commission, which helps write the rules and regulations governing credit unions.
The Community CU conversion deal caused additional concern among opponents to such charter switches when the $1.3-billion credit union convert launched an initial public stock offering just six months later, enabling officers and directors to quickly cash in on the charter switch and seemingly making conversions more attractive.
Under the terms of the bank deal, ViewPoint will pay about $70 million of its stock to acquire Highland, which is based in nearby Jacksboro, Texas.
