3 Big Losers in New England May Be Facing Legal Action
The National Credit Union Administration is considering civil and criminal action against three New England credit unions that have amassed millions of dollars in losses.
They caused a depletion of $120 million at the National Credit Union Insurance Fund, which insures 13,000 credit unions. The regulator recently imposed a premium on all federally insured credit unions - its first in seven years - to make up for insurance fund payouts in New England. The assessment of 8.3 cents for every $100 of deposits took effect in September.
The three, all based in Massachusetts, are: Barnstable Community Federal Credit Union in Hyannis, which has $43 million of assets and is currently being liquidated; Progressive Consumers Federal Credit Union in Malden, with about $400 million in assets; and Blue Hill Community Federal Credit Union in Brookline, with about $160 million in assets.
Progressive and Blue Hill are operating in conservatorship.
"We are actively investigating all three cases on the civil side . . . and also the criminal side," said Robert M. Fenner, the agency's general counsel.
Attorneys representing the defendents either could not be reached for comment, or declined to comment.
To date, the regulator has brought only one suit against officers and directors of the three credit unions. In June, it charged the chairman of Barnstable and several other officials with fraudulent loan transactions and diverting funds to their own use. The suit was brought in federal court in Boston, said Layne Bumgardner, director of the NCUA's regional office in Albany, N.Y.
NCUA officials do not believe the problems at the three institutions have spread to other New England credit unions.
"It seems pretty clear that these are isolated cases," said Mr. Fenner, who leads a five-person staff. "But they are proving expensive."
About half of Progressive's assets were commercial real estate loans, Mr. Bumgardner said, while Blue Hill lent heavily to condominiums and other real estate construction projects.
"We have learned that commercial real estate development is a very risky lending type of activity," Mr. Fenner said. [Tabular Data Omitted]