CHURCH FIGHTS NCUA OVER
$1.5-MILLION NCUSIF CLAIM
CLEVELAND-A local church that lost $1.5 million in the collapse of St. Paul Croatian FCU has petitioned a federal court here for the internal records of NCUA in the days preceding the regulator's April 2010 takeover and liquidation of the one-time $240-million CU.
In its motion to allow discovery, Holy Love Ministries claims NCUA officials rejected its attempt to withdraw $1.1 million of its funds the day before the NCUA takeover, insisting that church leaders wait four days, to make the withdrawal. "The following day NCUA held a board meeting and placed St. Paul's into conservatorship, instituting a share withdrawal of only $5,000 per week during the conservatorship," explained Church attorneys in a new filing with the U.S. District Court for the Northern District of Ohio. The following week, NCUA liquidated the insolvent 67-year-old credit union, causing Holy Love to lose $1.5 million "the money they attempted to withdraw a week earlier."
Holy Love is one of several Cleveland churches, businesses, individual members, as well as outside CUs who have been left holding millions of dollars in uninsured deposits at St. Paul Croatian FCU, after NCUA paid the maximum $250,000 per account insurance. Nine individuals, including the credit union's CEO, have been convicted of a scheme by which they obtained tens of millions of dollars in loans they never intended to repay.
NCUA estimates the failure of St. Paul Croatian will cost the National CU Share Insurance Fund $170 million in losses, making it the biggest credit union fraud ever.
NCUA, which rejected the church's claims under its administrative appeals process, has objected to the church's request for discovery in the case, arguing that judicial review in such cases is generally limited to the administrative record and does not traditionally permit discovery. The rationale is that the court should not substitute its judgment for that of the agency. One exception is a "strong showing of bad faith or improper behavior" on the part of the agency, which the church is alleging occurred.
Holy Love Ministries says its representative, who served on the St. Paul Croatian board, asked the NCUA Problem Case Officer Kim Paige on April 22 to withdraw $1.1 million, but the NCUA official rejected the request and told the church representative to wait until the following Monday, April 26, to make the withdrawal. But the next day, April 23, NCUA took the credit union under conservatorship and froze all withdrawals over $5,000. A week later, on April 30, NCUA liquidated St. Paul Croatian, resulting in a loss of $1.5 million for Holy Love Ministries, after reimbursement of the $250,000 federal deposit insurance limit.
"Thus, as a direct result of Kim Page's advice, Holy Love was unable to withdraw its own funds, which 'did not allow (the church) to protect ourselves' when St. Paul's was placed under conservatorship," says the church in its court filing.
The church claims there is evidence that NCUA refused the $1.1-million withdrawal because it knew it would be taking over the credit union. "The proximity of the withdrawal refusal and the conservatorship as well as the numerous conversations mentioned in the record concerning the withdrawal are evidence of NCUA's knowledge and its bad faith action," says the church in its filing.
Under NCUA regulations, according to the church, NCUA only has the right to refuse withdrawals after taking possession of a CU and NCUA had not taken possession on the day the $1.1-million withdrawal request occurred. In addition, NCUA also violated its own $5,000 limit on withdrawals numerous times by request of several members of St. Paul Croatian, says the Church. NCUA does not comment on pending litigation.
PEOPLE FOR PEOPLE CDCU
IS YEAR'S SECOND CU FAILURE
PHILADELPHIA-NCUA liquidated People for People Community Development CU and assigned the remnants of the failed $1.3-million CU to $1.4-billion TruMark Financial CU.
The so-called purchase and assumption deal is the second CU failure of the year, following NCUA's takeover of AM Community CU, a $125-million auto workers CU in Kenosha, Wis. NCUA said made the decision to liquidate People for People CDCU and discontinue its operations after determining the credit union was insolvent and has no prospect for restoring viable operations on its own. At the time of liquidation and subsequent purchase by TruMark, the tiny CDCU served approximately 1,600 members and had assets of approximately $635,000.
Chartered in 1999 by the Pennsylvania Department of Banking, People for People Community served an underserved community located in north central Philadelphia.
The Pennsylvania Department of Banking concurred with the decisions to liquidate People for People CDCU and to transfer the former credit union's members and loans to TruMark Financial.
CUS SUPPORT BILL ENSURING
PRIVACY PROTECTION AT CFPB
WASHINGTON-Credit unions have thrown their support behind a bill that would ensure that privileged information provided to the new Consumer Financial Protection Bureau will remain confidential.
"It is critical that this type of privacy protection from third parties, which currently exists between credit unions and [NCUA], is clearly spelled out in the law with respect to the CFPB," said NAFCU's Chief Lobbyist Dan Berger, in a letter to Republican and Democratic leaders of the House Financial Services Committee.
Failure to enact the requirement, wrote Berger, could lead to disclosure of privileged information that could leave CUs vulnerable. "NAFCU believes having clarity in the statute," he wrote, "could also help ensure that credit unions will have a greater comfort level in providing requested information.
