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CU System briefs (09/26/2011)

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* AUGUSTA, Ga. (9/27/11)--An investigation is continuing into what caused a fire early Friday morning that destroyed the main office of Augusta (Ga.) VAH FCU (WJBF.com Sept. 23). The Augusta Fire Department said that it doesn't suspect foul play or arson at this time. The fire broke out at about 5 a.m., and a burglar alarm went off just before the fire broke out, said local media. The credit union said a security guard was on site through the weekend protecting the vault and the safety deposit boxes, which were not damaged. No one was injured in the fire … * BIRMINGHAM, Ala. (9/27/11)--Michael John Young, 42, former president of Birmingham, Ala.-based Alabama Central CU, was sentenced Thursday to 17 months in prison for allegedly submitting $140,000 in bills from two fictitious companies that were paid by the credit union for services not provided. Young pleaded guilty to the bank fraud charge in June. U.S. District Judge L. Scott Coogler also ordered Young to pay $140,000 in restitution. The bills were submitted between April 2009 and June 2010 (Birmingham Business Journal Online and Associated Press via Bloomberg Businessweek Sept. 23) … * RICHMOND, Va. (9/27/11)--Debra R. Morris, 60, former manager of the St. Paul's Baptist FCU in Richmond, Va., has been charged with embezzling $40,000 from the credit union. She was arrested Thursday and charged with two counts of embezzlement after an audit turned up suspicious financial actions between June 2, 2008, and April 2010. The credit union, which was run by volunteers and served a church congregation, merged with Richmond-based, $120 million asset Henrico FCU earlier this month. Until the merger, St. Paul's had 684 members with $326,338 in assets, according to the National Credit Union Administration (Richmond Times-Dispatch Sept. 24) …

California regulator CUs 2Q net worth ratio increased

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SACRAMENTO, Calif. (9/27/11)--Second quarter 2011 net income was up for California's state-chartered credit unions, reported the California Department of Financial Institutions in its summary statistics for the quarter. Net income for credit unions in the state rose 135.4%, while net worth increased 7.1%. Net income rose to $301.3 million from $128 million for the first half of 2010. Net worth rose to $7.1 billion on June 30 from $6.6 billion a year ago, bringing the net worth-to-asset ratio to 9.75% from last year's 9.09%. Assets for state-chartered credit unions in California remained steady at $72.4 billion, with shares at $62.1 billion, each down a fraction of a percent from a year ago. Loans dropped 7.8% --to $41.1 billion from $44.6 billion, said the regulator. Allowance for loan losses totaled $1.2 billion, down 11% from $1.4 billion last year. Delinquent loans were down 22.8% to $901.5 million from 2010's $1.2 billion. Delinquent loans as a percentage of total loans were 2.19%, compared with 2.62% for first half 2010. Other real estate owned rose $34.6 million or 30.7% to $147.3 million from last year. Net margin to average assets for second quarter was 4.22%, down from 4.41% the previous year, while provision for loan losses dropped 50% to $215 million from $429.8 million for the period. As of June 30, the number of state-chartered credit unions shrank to 159 from 167--a 4.8% decrease. State chartered banks dropped by 6.1% to 186 from a year ago.

Govt charges gambling site tied to CU with money laundering

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WASHINGTON (9/27/11)--The Department of Justice has charged the owners and executives of an online gambling site, which deposited funds into a now-defunct Arizona-based credit union, with paying themselves $444 million since 2007 while defrauding players in what the government alleges was a massive Ponzi scheme. The department filed an amended complaint Sept. 20, according to The Wall Street Journal (Sept. 26). It had filed civil allegations against the site, Full Tilt Poker, as well as other online poker sites and executives at relatedl companies in April, accusing them of money laundering, bank fraud, and illegal gambling. Full Tilt alleges the government crippled its ability to collect money from players in the U.S. because the government maintained online gambling is illegal. However, the government alleges the site allowed players to bet with funds it never collected, creating $130 million in phantom funds, and then used other players' money to pay both players cashing out and the site's owners (The Journal and Forbes Aug. 30). The government closed the site in April and the company could not pay $300 million the Justice Department said it owed players. The situation that "tipped the balance" involved Vensure FCU, a small credit union in Mesa, Ariz., which allegedly deposited poker-related funds and was placed into conservatorship by federal regulators in April, said the Journal. NCUA placed the credit union into conservatorship on April 15 (News Now April 15). When it finally shuttered the credit union in July, NCUA said the 140 member, $8.1 million asset credit union was insolvent and had failed to properly diversify its business (News Now July 13). The agency had recommended the credit union build a loan program but found it relied on income from processing online gambling transactions to survive. The credit union challenged the conservatorship, but in late June a U.S. District Court rejected its challenge. In its complaint, the credit union admitted it had taken part in poker-related fund transactions, which increased its asset size but did not permanently intent to depend on those revenues. In 2006, the U.S. made it illegal to process funds related to online gambling. Poker sites started using companies to act as middlemen but the companies were closed off by the government, said the Journal. The sites allegedly turned to 16 small banks and credit institutions to process their transactions. Regulations allow a bank or credit union to process transactions if it can get a reasoned legal opinion that the transactions are legal, said the Journal.

Visa MC expected to raise small-purchase fees

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NEW YORK (9/27/11)--Visa Inc. and MasterCard Inc. plan to increase the fees merchants pay for small-ticket debit purchases to the full amount allowed under the Federal Reserve's new rules that take effect Oct. 1, said analysts interviewed by Bloomberg News and The Wall Street Journal (Sept. 23) . The move could discourage some merchants from accepting debit cards for small transactions. The world's largest payments networks may increase fees from eight cents for a $2 purchase to 23 cents, Thomas McCrohan, analyst at Janney Montgomery Scott LLC, told the publications. The move could result in a backlash from "mom and pop" merchants such as coffee shops, which process a lot of $3 transactions, said Bloomberg News. A second analyst, John Kraft with D.A. Davidson & Co. said Visa plans to increase its rate for some small ticket transactions to an amount equal to the Federal Reserve's cap. Although Visa and MasterCard have not officially announced these specific increases, they have indicated they would change interchange fees on debit cards in response to the Federal Reserve's rules finalized in June and mandated by the Dodd-Frank Act. The rules limit the fees merchants pay for a consumer's debit card transaction to 24 cents per transaction. The cap applies to banks with assets of $10 billion or more. Both Visa and MasterCard met in August with the Credit Union National Association on debit card interchange fee issues concerning credit unions and indicated then they would implement a two-tiered debit interchange fee structure (News Now Aug. 24). MasterCard told the Journal Thursday that it recently informed banks it will implement a "two-tiered interchange structure" for debit and prepaid cards for issuers affected by the cap and those that are exempt. And a Visa spokesman said the company had notified clients of some rate changes. Atlanta-based payments processor First Data Corp. sent clients a notice earlier this month saying that Visa will increases prices for small-ticket debit transactions subject to the new rate caps to a price that would equal 0.05% of the transaction amount, plus 21 cents and a one-cent adjustment for fraud costs. The Journal noted that any increase for small ticket transaction fees would not likely affect all merchants equally because fees vary depending on the type of retailer and volume of card purchases.

Kansas CU Association relocates Wichita headquarters

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WICHITA, Kan. (9/27/11)--The Wichita office of the Kansas Credit Union Association (KCUA) has relocated a few miles northwest of its old location. The new address is: 2872 North Ridge Road

Suite 122

Wichita, KS 67205

The phone and fax numbers remain the same: Toll free: 800-362-2076

In Wichita: 316-942-7965

Fax: 316-206-2203

KCUA also can be found online. Use the link. The Wichita office houses KCUA’s education and training; marketing and communications departments; consulting services; and for-profit entity, Shared Financial Solutions (SFS). SFS provides services to credit unions throughout Kansas and Nebraska. KCUA has a satellite office in Topeka, which provides governmental and regulatory advocacy and compliance services. The association serves 93 credit unions in Kansas.

Indiana foundation director joins NCUF Board

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MADISON, Wis. (9/27/11)--Joe Guilfoy, executive director of the Indiana Credit Union Foundation and vice president of consulting & education at the Indiana Credit Union League, has joined the board of directors of the National Credit Union Foundation (NCUF). Guilfoy was elected at NCUF’s board meeting last week in Washington, D.C., and is the new state credit union foundation (SCUF) network representative on the board. The board seat was most recently held by Danielle Brown, former senior vice president of operations at the Northwest Credit Union Association. Guilfoy noted that the partnership between the NCUF and the SCUF network delivers programs “that assist individuals of all ages to improve their financial literacy and situation. Credit union foundations are an important way that the ‘people-helping-people’ philosophy of credit unions can be demonstrated to a broader audience of consumers.” The 13 voting seats on the NCUF Board include representatives of natural person credit unions, national organizations serving credit unions, corporate credit unions, state credit union foundations, state leagues and an at-large position. To see a complete list of the NCUF board, use the link.

Iowa CU reps honored at Iowa CU Convention

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DES MOINES, Iowa (9/27/11)--The Iowa Credit Union League (ICUL) honored three credit union representatives at the Iowa Credit Union Convention in Des Moines, Sept. 14-16.
Click to view larger image The Iowa Credit Union League awarded Larry Nuss the 2011 Heritage Award for lifetime achievement within the credit union industry. From left are: Joe Hearn, league board chairman; Nuss, retired CEO, Cedar Falls (Iowa) Community CU; and Pat Jury, president/CEO, Iowa league. (Photo provided by the Iowa Credit Union League)
Larry Nuss received the 2011 Heritage Award for lifetime achievement within the credit union industry. Nuss has been active within the credit union movement for more than 50 years. His past credit union involvement includes serving as Cedar Falls (Iowa) Community CU’s CEO for more than 32 years, as chairman of the league, and as vice president and president of the Black Hawk Chapter of Iowa credit unions, among others. Tom Kuehl was presented with the 2011 Professional Cooperative Spirit Award in recognition of outstanding service, commitment and leadership in the credit union movement. Kuehl has been in the credit union industry for more than 30 years and as a leader, change agent and advocate for the movement. Most recently, Kuehl served as CEO for The Members Group, and prior to that, as CEO of Iowa Corporate Central CU, Des Moines. Financial Plus CU Board Member Steve Williams received the 2011 Volunteer Cooperative Spirit award for his volunteer accomplishments in the credit union industry. A few of Williams’ involvements include serving as a board member; treasurer; member of the audit and credit committees; and chairperson of Financial Plus CU, Des Moines. During his 35 years of service, Williams has seen the credit union grow and develop along with the credit union movement.

Calif. league to recognize CU leaders

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ONTARIO, Calif. (9/27/11)--Five credit union leaders and volunteers--including Robert Rose, 2011 Leo H. Shapiro Lifetime Achievement Award recipient and retired CEO of CO-OP Financial Services--will be honored at this year’s California and Nevada Credit Union Leagues’ Annual Meeting and Convention. The honorees of the Shapiro, Distinguished Service, Outstanding Volunteer and Tomorrow’s Star Awards are among those to be recognized during the event, Oct. 26-28 in San Diego. The Shapiro award is the California league’s highest honor, recognizing excellence in credit union philosophy and a lifetime of contributions to the California credit union movement. It is named after the father of the California credit union movement and founder of the league. Rose will receive the award Oct. 26. During his more than 36-year career, he served credit unions at every level of the credit union system. He was an assistant manager of one credit union and manager of another, senior vice president at the league and CEO of Water and Power CU, and interim president of Financial Services Center Cooperatives. In 1990, Rose became CEO of the then-CO-OP Network, then the 49th largest electronic funds transfer network in the country. Today, the Rancho Cucamonga, Calif.-based CO-OP Financial Services is the fifth-largest EFT network. Other award recipients this year include:
* Lynn Athens, CEO, Spectrum FCU, San Francisco--Distinguished Service Award; * Gerald Upson, board member, Patelco CU, Pleasanton, Calif.--Outstanding Volunteer Award; and * Paris Chevalier, vice president of marketing and communications, Xceed Financial CU, El Segundo, Calif.; and Maricela Jauregui, branch manager Mid-Cities CU, Compton, Calif.--Tomorrow’s Star Awards.
Athens, Upson, Chevalier and Jauregui will receive their awards Oct. 28.