FARGO, N.D.–North Dakota credit unions will be receiving more than $11.9 million in recovered assets that had previously been denied by NCUA, according to the terms of a settlement of a lawsuit.
As CUToday.info has been reporting, for two years the Dakota Credit Union Association has been leading an effort on behalf of North Dakota members to recover funds that were withheld following the financial collapse of five corporate credit unions that began in 2008.
The Dakotas Credit Union Association is reporting the agency has agreed to settle the dispute following the judge’s denial to dismiss the lawsuit filed by the credit unions early in 2023 in U.S. District Court in Kansas. NCUA plans to return the assets by Jan. 18, 2024, the association said.
Lawsuit Filed
A civil lawsuit was filed in April of 2023 by 25 North Dakota credit unions “following repeated appeals to NCUA to return the recovered assets to the rightful owners,” the DCUA said.
The credit unions noted that when U.S. Central membership capital account (MCA) balances were depleted, NCUA appointed itself the liquidating agent and issued claim receipts to MCA holders, including Midwest Corporate FCU and its capital members, which were North Dakota credit unions.
In Possession of Claims Certificate
“The former owners of Midwest Corporate possessed a claims certificate issued by the NCUA from Oct. 5, 2010,” the association explained. “The lawsuit maintained that when Midwest Corporate was dissolved in 2011, its remaining assets became the property of the credit unions, and that the NCUA wrongfully denied payment of their share of those assets. The judge agreed.”
On Oct. 10, 2023, Judge Eric Melgren, chief judge of the U.S. District Court in Kansas, issued an order denying NCUA’s motion to dismiss the North Dakota credit unions’ lawsuit over the Midwest Corporate claims certificate and amounts owed by U.S. Central.
Following the decision, NCUA agreed to settle, in effect returning $11.9 million to the credit unions, the association said.
‘Simple Logic’
“(S)imple logic and hornbook property law support construing the FCUA as including automatic transfer of assets,” Melgren wrote in his opinion. “In general, assets do not simply evaporate when the owner is unable to collect; rather the property must go somewhere. Consequently, a credit union’s assets likewise do not cease to exist come the last day of wind-up. Instead, the most logical conclusion is that the assets vest in the credit union’s shareholders.”
The Dakotas Credit Union Association further noted that when NCUA began reimbursing recovered U.S. Central assets to credit unions in 2021, the agency sent letters to North Dakota credit unions indicating that because Midwest Corporate no longer existed, Midwest Corporate and its credit union members were not eligible to receive a distribution of the funds.
‘Clear & Concise Statement’
“The judge’s clear and concise statement of the court’s position was almost word for word the argument North Dakota credit unions made to the NCUA on day one,” Jeff Olson, president/CEO of the Dakota Credit Union Association said in a statement. “Further, the court held as a matter of law the claim receipt vested in the individual credit union members upon dissolution. We were very critical of the NCUA throughout the process, as we maintained that the agency was not properly recognizing our North Dakota members as the rightful owners of the recovered U.S. Central assets.
“Based on the claims receipt, we firmly believed that our North Dakota credit unions were entitled to the entire MCA balance and an equal percentage of the paid-in capital payments that have been reimbursed to other credit unions,” Olson continued. “We are extremely pleased with the decision to settle, and I enthusiastically applaud the NCUA for doing the right thing.”
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