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Judge freezes Central States funds
MILWAUKEE (3/16/09)--A Milwaukee County Circuit Court judge has frozen up to $3.37 million in loan money held in a credit union account on behalf of CSMC Inc., better known as Central States Mortgage Co., which suspended operations on March 9. Circuit Judge David Hansher issued a temporary restraining order late Thursday after Associated Bank sued the Wisconsin-based mortgage lender, alleging fraud for refusing to promptly pay down a loan, said the Milwaukee Journal Sentinel (March 12). Central States Mortgage Co. (CSM) had served 250 credit unions nationwide, originating and servicing mortgages. Twenty-three wrote off their investment in the company during fourth quarter, according to regulatory reports obtained by the Journal Sentinel. The Associated Bank lawsuit alleges that Central States borrowed funds from the bank to finance 13 mortgage loans and then sold 12 to investors but did not pay down the loan, as required. The bank alleged the mortgage company tapped its line of credit between Christmas and New Year's Eve, about two months after it was informed the credit line would close Jan. 5. Last month, a Wisconsin court awarded U.S. Bank a $2.7 million judgment against Interim Funding LLC of Wauwatosa, Wis., a firm owned by the founder and former CEO of CSM, Dick Jungen. The bank sued Jungen and five executives of Interim, including three former CSM employees, alleging the company defaulted on a $3 million revolving loan from the bank. CSM fired Jungen in July 2008 after the credit union service organization learned he secretly controlled Interim Funding. The CUSO sued in February, alleging he scammed the CUSO out of $15 million (News Now March 2). The case is pending (The Business Journal Milwaukee March 9). Central States' parent company, CSCM, also is a defendant in a lawsuit filed Feb. 24 by Equitable Bank of Wauwatosa involving a foreclosure on a condo project in West Allis, Wis. CSMC holds a $4.3 million mortgage with a development group that includes Jungen, said the newspaper.


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