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Members drop suit vs. CU related to mortgage tax

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NEW YORK (7/27/10)--The dismissal in May of Hudson Valley CU's lawsuit contesting New York's mortgage recording tax (MRT) has also resulted in the end of a class action suit against the credit union for charging the tax to its mortgage borrowers. Three credit union members who paid the tax required under New York law have dropped their suit in the U.S. District Court for the Southern District of New York against the credit union and title insurance companies (Times Herald-Record July 24). Their suit claimed that the taxes were unlawful under the Federal Credit Union Act and should not have been charged because the credit union knew the taxes were illegal (News Now June 4). The members filed a voluntary dismissal on Thursday. Their lawyer, Mark Kindall of Izard Nobel, a Hartford, Conn., law firm, told the Times Herald-Record that the judge's ruling in May to dismiss the credit union's case against the state made proceeding with the class action suit substantially more difficult. They had sought the refunding of three times the tax paid to have their mortgages recorded with their counties. The central argument of their case maintained the Federal Credit Union Act prohibits such taxes on them. The Poughkeepsie, N.Y.-based credit union filed suit in May 2009 against the New York State Department of Taxation and Finance saying the credit union is exempt from the MRT. However, State Supreme Court Justice Judith Gische dismissed the credit union's challenge on May 20, thus killing the central argument in the borrowers' suit. The credit union has appealed the ruling ( May 24).

Suit claims defunct CUs embezzlement required accomplice

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BRIDGEPORT, Conn. (7/27/10)--More charges and countercharges have been filed in a U.S. District Court in Bridgeport, Conn., related to a decades-long, $12 million embezzlement of funds that prompted the collapse of New London (Conn.) Security FCU in July 2008. The latest countersuit, by Wells Fargo Advisors, alleges that the credit union's long-time investment adviser, Edwin F. Rachleff, had help from inside the credit union. Rachleff , an employee of investment firm A.G. Edwards & Sons, had an office at the credit union and allegedly funneled the investments of members into Elmore Shoe Co., a business owned and operated by Rachleff as part of the fraud, said the complaint. The embezzlements occurred from 1988 until July 2008, when the fraud was discovered. Rachleff committed suicide the day the credit union was shuttered. Wells Fargo Advisors is the company succeeding in interest to Wachovia Securities, which bought the A.G. Edwards investment firm. Wells Fargo's third party complaint, filed in the U.S. District Court for the District of Connecticut on March 29, faulted the credit union's board and manager for not discovering the fraud and providing safeguards and its external auditors, Ed Lorah & Associates and Beller Shepatin & Co., for allowing the fraud to go undetected. The countersuit noted that "Rachleff's misconduct was amateurish, even obvious, but it went undeterred for years, even decades, due to the third party defendants' lack of care." "Rachleff's eyesight was seriously compromised, and ... he was legally blind," the complaint said. "The vision issue created a need for Rachleff to have an accomplice to effect the fraud," it added, saying he "looked no further than New London's management to find 'eyes' to perpetrate his plan." The document alleges that Mary Richards, New London's manager at the time, "manually typed the statements bearing the indicated, but fraudulent and fabricated, investment entries and investment returns ... every month, month to month, year to year." On July 6 one of several memorandums in support of a motion to dismiss the countersuit was filed by board members of the credit union. It noted that if the fraud was that obvious, "Wells Fargo was in a much better position to monitor Mr. Rachleff's conduct. In essence, the employer of the thief has now sued the victims, claiming that the victims owed a duty to the thief's employer to prevent the thief from stealing from them." The countersuit responds to a suit brought by the National Credit Union Administration, which said the National Credit Union Share Insurance Fund lost $10 million from the credit union's failure.

Arrowhead Central lays off 27 employees

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SAN BERNARDINO, Calif. (7/27/10)--Regulators laid off 27 employees of Arrowhead Central CU Friday at its main office in San Bernardino, Calif., and at some of its 19 branches. The layoffs were made to “maintain service while protecting member assets,” John McKechnie, director of congressional and public affairs for the National Credit Union Administration (NCUA), confirmed with News Now Monday. As conservator of Arrowhead, NCUA posted its corrected version Friday of the $876 million asset credit union’s second quarter Call Report. NCUA says it showed a continued decline in Arrowhead Central’s financial condition from loan portfolio losses (News Now July 26). NCUA placed the credit union into conservatorship on June 25 due to its declining financial condition. The credit union has continued serving its members as NCUA has worked to stabilize the institution’s operations. Earlier this month, the agency fired four former Arrowhead Central CU employees, including CEO Larry Sharp, who had been placed on temporary administrative leave when NCUA assumed control of the credit union (News Now July 16). “Arrowhead Central CU is open for business and has continued uninterrupted service to members since the June 25 conservatorship,” McKechnie told News Now last week. “The credit union is operating normally, and member funds are federally insured up to $250,000. NCUA’s principal goal in conserving Arrowhead CU is to protect the members and preserve their assets. “Given that losses at Arrowhead were continuing, and the credit union was not reversing negative trends and was not on a trajectory to return to profitability, the most prudent course of action was for NCUA to assume control of Arrowhead,” he added. “NCUA is conducting a thorough review of Arrowhead’s operations, and will make a determination about the future of the institution when that review is completed.”

Economic Forum speaker had key role in Census improvements

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PLANO, Texas (7/27/10)--Kathleen Cooper, an economist and senior fellow at Southern Methodist University in Dallas, will speak at Southwest Corporate FCU’s 33rd Annual Economic Forum, Oct. 26. Online registration begins today. In addition to providing a forecast on U.S. economic trends for credit unions, Cooper also will discuss the impact of innovation on the economy. She has served on the Commerce Department’s advisory committee for Measuring Innovation in the 21st Century Economy. Cooper was under secretary for Economic Affairs of the U.S. Department of Commerce from 2001 to 2005, where she oversaw the activities of the Census Bureau and the Bureau of Economic Analysis. She helped to advocate changes that netted a 72% “mail-back rate”--up from 69% in 2000 and 65% in 1990. Even though the once-a-decade census is constitutionally mandated, it helps to determine seats in the House of Representatives and serves as a guide as the federal government divvies up some $400 billion to support local infrastructures, the process is often viewed with public skepticism, Cooper said. In the past, most households received a short census form that took only minutes to complete. About one-sixth of households now receive the “long form,” which contained nearly 50 questions and asked about mortgage payments, what time residents leave to go to work and indoor plumbing. The “long form” questions are necessary to help understand the condition and character of America’s population, but the process still seems intrusive to some, Cooper said. Cooper recommended "de-linking" the long form from the head counting process more commonly associated with the census. The long form process, now known as the American Community Survey, was implemented several years ago. The survey takes a more statistical approach to building the national portrait. This year, all households received only the shorter, 10-question census form. Between the shorter form and an advertising campaign to promote awareness, participation continued to climb. The more people who returned the forms, the fewer door-to-door census workers were needed to complete the mandated count, Cooper said. For more information, use the link.

Growth of CUs topic of three newspaper reports

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MADISON, Wis. (7/27/10)--The growth of individual credit unions across the nation was the topic of the three recent newspaper reports. Summit CU, Madison, Wis., through a series of mergers and by growing its existing business, has become the largest credit union in Wisconsin, with assets of roughly $1.5 billion, according to the Milwaukee Journal Sentinel (July 24). In June, Summit finalized a merger with State Central CU in West Allis, Wis., acquiring nearly $69 million in assets and adding four branches in the metropolitan Milwaukee area. Summit can keep new potential markets in sight because its state charter allows it to add any person in the state who wants to become a member, the newspaper said. Despite the recession, some Ohio credit unions still are seeing growth, according to the News Herald (July 26). Geauga CU, a $27.6 million asset, Burton, Ohio-based credit union, has seen an upsurge in loan requests during the past year, although it hasn’t been able to grant them all. Eaton Family CU, a $39.6 million asset, Euclid, Ohio-based credit union, is continuing to see an increase in demand for personal loans and its credit card line, the Herald said. Some Maryland credit unions are giving banks more competition for deposits and loans, according to The Capital (July 25). U.S. Coast Guard Community CU, a $33.3 million asset, Baltimore-based credit union, told the newspaper its low interest rates on loans, higher rates on savings accounts, and return of all profits to members are features that “make credit unions a great deal in turbulent times for banks.” Rod Staatz, CEO of State Employees CU in Linthicum, Md.--the state’s largest credit union--told the paper that although credit unions tend to be more conservative than banks, his credit union is growing. To read the articles, use the links.

City-County FCU to be absorbed by Wings Financial

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MINNEAPOLIS (7/27/10)--City-County FCU, Minneapolis, will be acquired by Wings Financial CU, Apple Valley, Minn., according to local media reports. City-County has seven branches in Hennepin County, Minn., and $466 million in assets. The credit union has been enduring some financial hardships, said The Star Tribune (July 21). City-County’s net worth was 2.98% at the end of March, according to National Credit Union Administration call reports the newspaper cited. Wings Financial has $2.5 billion in assets and 19 branches, with eight in Minneapolis and St. Paul, Minn. The credit union anticipates it will keep about two-thirds of City-County’s 145 employees, Wings CEO Paul Parish told the newspaper. At the end of June, Wings also announced it was merging with Highgrove CU, a $37-million-asset credit union in St. Paul. The two mergers give Wings Financial a larger presence in the Minneapolis-St. Paul areas, the Tribune added.

N.Y. Foundation holds statewide fin ed conference

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The New York Credit Union Foundation offered a free one-day financial education training program using interactive distance learning. More than 210 individuals participated. (Photo provided by the New York Credit Union Foundation)
ALBANY, N.Y. (7/27/10)--The New York Credit Union Foundation offered a one-day financial education training program using interactive distance learning for credit unions. More than 210 individuals participated in the teleconference, which was broadcast from Cornell University in Ithaca, N.Y. The event was broadcast to 19 satellite locations. Most of the locations were Cornell Cooperative Extension offices. The program offered train-the-trainer sessions for the National Endowment for Financial Education (NEFE) High School Financial Planning Program, and presentations on four financial topics. The topics included investing in today’s economy, new credit card regulations, lessons on avoiding debt and an online Internal Revenue Service program, Understanding Taxes. The sessions were offered to credit union staff, volunteers, educators and representatives from community-based organizations. NEFE New York sponsors included Liverpool (N.Y.) Central Schools FCU; Mid-Hudson Valley FCU, Kingston; MONEY FCU, Syracuse; and Municipal CU, New York City.

U.K. s Unity Trust Bank launches CU awards

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Marlene Shiels, World Council of Credit Unions director, explains the importance of the global credit union movement to dignitaries in the United Kingdom's House of Lords, as Damian Hinds, chair of the Parliamentary All Party Group on Credit Unions looks on. (Photo provided by the World Council of Credit Unions)
LONDON (7/27/10)--To help publicize the positive role credit unions play, particularly in light of the recent global economic crisis, the United Kingdom’s (U.K.'s) Unity Trust Bank last week launched the country’s first National Credit Union Awards for Excellence program. World Council of Credit Unions (WOCCU) Director Marlene Shiels, chief executive of Capital CU in Edinburgh, Scotland, participated in the launch of the program, which will recognize its first round of honorees in February 2011. "Every day, more than 49,000 credit unions worldwide provide products and services to their members, especially those demonstrating the greatest financial need," said Shiels to assembled dignitaries of the U.K.’s House of Lords Thursday. "These awards are a tribute to those credit unions and individuals who have gone above and beyond on behalf of their members.” The National Credit Union Awards for Excellence, which Unity Trust organizers say have been modeled after similar programs in Canada and the U.S., will recognize top performers in the areas of marketing, community mobilization, credit union education, fundraising and active partnerships, as well as provide an award to a single benefactor of the U.K.’s credit union movement. The top honor, as drawn from all six categories, is named after Edward A. Filene, the Boston merchant who helped pioneer the U.S. credit union movement. Winners in each category will receive trophies and cash awards. “These awards emphasize that our historic support for credit unions remains a long-term commitment and a fundamental building block in our strategy of promoting key social initiatives such as tackling financial and social exclusion,” said Kevin Turmore, managing director of Unity Trust, which provides banking services to more than 48% of the U.K.’s credit unions. Although not formally a part of the awards judging panel, WOCCU representatives have been invited to participate in next year's ceremony recognizing award winners.

CU System briefs (07/26/2010)

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* MESA, Ariz. (7/27/10)--A former employee of Phoenix-based Arizona FCU employee was arrested Wednesday and charged with identity theft by Mesa police after allegedly applying for credit with the personal information of four members. Esther J. Hulse, 46, allegedly used a member's identity and her own address to apply for credit cards. The thefts were discovered when a credit union member received a call June 22 from Bank of America, thanking her for applying for a credit card online. The call prompted her to review her credit report, where she discovered someone had used her name, birthdate and Social Security number for credit cards from Capital One and Bank of America. Hulse owns the residence at the address given to the card issuers. The victim recognized Hulse's name as the credit union employee who helped her refinance her home. (The Arizona Republic July 22) ... * FORT WAYNE, Ind. (7/27/10)--An e-mail scam is using the name of Fort Financial CU, a $180 million asset credit union in Fort Wayne, Ind., said Indiana State Police in a press release last week. The e-mail informs recipients that unusual or potentially high risk activity has been observed in their account and instructs them to download a form attached to the e-mail and open it in a Web browser. The form asks for full name, credit/debit card number, card expiration date, card verification number and its PIN. The credit union doesn't solicit its members to verify their account information by e-mail and phone ... * HARRISBURG, Pa. (7/27/10)--LANCO FCU, based in Lancaster, Pa., is reporting that fraudulent checks using the credit union's routing number have surfaced in the Cincinnati, Ohio area, according to the Pennsylvania Credit Union Association (PCUA). Fraudsters are using the fake information to purchase goods at department and grocery stores, said PCUA (Life is a Highway July 26) ... * HARRISBURG, Pa. (7/27/10)--Erie (Pa.) FCU CEO Norb Kaczmarek was honored Saturday with a retirement dinner attended by nearly 200 people, according to the Pennsylvania Credit Union Association (PCUA). Among those speaking at the event were the credit union's incoming CEO, Mary Beth Wilcher; PCUA Board Chairman Ray Brunner; and PCUA President/CEO Jim McCormack. Kaczmarek's career began with Erie FCU in 1969. He has served on PCUA's Board of Directors since 1997 and was chairman 2005-2007. He continues to serve as a PCUA board member, ex-officio member of the Pennsylvania Credit Union Foundation board, and treasurer of PaCUSC board (Life is a Highway July 26) ...

Filene welcomes five research council members

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MADISON, Wis. (7/27/10)--The Filene Research Institute welcomed five new credit union CEOs to its research council. The council helps decide which topics Filene should research and which volunteers will pilot Filene innovations. It also works with Filene’s outside researchers to provide access and insight to the credit union system. The new members are:
* Gerry Agnes, Elevations CU, Boulder, Colo. Agnes previously was with Altura CU, Riverside, Calif., where he worked as president/chief operating officer, chief financial officer, and president of its subsidiary holding company. * Mary Madden, Hudson Valley FCU, Poughkeepsie, N.Y. She has worked more than 20 years to educate people on the value of belonging to nonprofit financial cooperatives. She has led Hudson Valley’s operations, marketing, lending and human resources departments during her tenure. * Lily Newfarmer, Tarrant County CU, Fort Worth, Texas. She has served in the credit union industry for 25 years and chairs the Texas Credit Union Foundation--where she has served as a board trustee since 2001. * Eugene Scymczak, Educators CU, Racine, Wis. He has served as loan officer, vice president of consumer lending and senior vice president of operations before becoming president in 1994. He started as a teller in 1972. * Launi Skinner, First West CU, Surrey, B.C. She has more than 20 years of business experience in the U.S. and Canada, including a term as president/CEO of 1-800-GOT-JUNK? Skinner served as president of the Starbucks U.S. stores division. She also was included as one of “Four Women to Watch” in Fortune Magazine’s 50 Most Powerful Women feature.
They join 27 members on the council from credit unions across North America. For more information, use the link.