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CU System
CSMC sues founder former execs for racketeering
WAUWATOSA, Wis. (2/5/09)--Central States Mortgage Co. (CSMC), one of Wisconsin’s largest mortgage bankers--partially owned by credit unions--is suing its founder and four other CSMC executives for racketeering and allegedly defrauding the company of at least $15 million. CSMC, founded in 1992 by Richard Jungen, also does business in Illinois. In 1997, the Wisconsin Credit Union League Service Corp. and 13 state-chartered credit unions in Wisconsin and Illinois acquired 53% of CSMC shares (Milwaukee Journal Sentinel Feb. 4). The remaining 47% of CSMC shares were held by Jungen and other former employees. Since 1997, the credit unions have acquired 72% of the shares. The Jungen group controls the rest. Jungen and others created Interim Funding--a limited liability corporation--that provided bridge loans to credit unions and sold them with CSMC. Jungen and the other defendants did not reveal their involvement in Interim to other CSMC officials, the suit alleges. Jungen was fired July 31, the lawsuit indicated. The others named in the suit were terminated within a few months. The lawsuit claims the $15 million in losses were the result of a conspiracy to shift distressed mortgage loans to CSMC from Interim, and that the transfer constituted a pattern of racketeering, including at least three instances of wire fraud and a breach of fiduciary duty.


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