The National Credit Union Administration is investigating California-based San Clemente Financial Group, apparently for selling improper products to credit unions.
"There is an ongoing investigation of the firm," said NCUA Executive Director Karl Hoyle.
Mr. Hoyle would not elaborate. The agency also denied a Freedom of Information Act request from the American Banker for documents the agency has on San Clemente, a certificate of deposit broker. It cited a provision of the act prohibiting disclosure that "would interfere with enforcement proceedings pending, contemplated, or in the future."
Tom Sunderland, a senior manager for San Clemente, would not comment on how many credit union clients San Clemente has, nor how much in credit union funds it has under management. A broker who works with credit unions estimated that San Clemente Financial controls about $500 million in credit union funds.
In 1993 the company sold a zero coupon certificate of deposit to Clarksburg, W. Va.-based United Hospital Center Federal Credit Union that was improper for it to hold, said Delores Hunt, manager of the $2.8 million-asset institution.
The certificate, purchased for $60,013, matures in 2008, she said. Under NCUA regulations, federal credit unions cannot invest in zero coupon certificates with a maturity beyond 10 years.
Ms. Hunt said an examiner pointed out that it was an improper investment earlier this year.
"The examiner said, 'If I have a problem, it's with this,'" she said, referring to the zero coupon bond.
San Clemente has been discussing taking back the certificate, she said this week.
The credit union had never dealt with San Clemente before this transaction, Ms. Hunt said.
"I don't know how they got a hold of us," she said.
Agency documents viewed by the American Banker indicate other credit unions have complained to the NCUA about San Clemente.
