INDIANAPOLIS–A bankruptcy trustee here has indicated she may sue a group of credit unions that are owners in a CUSO that made student loans to students attending the now defunct ITT Technical Institute.
Seven credit unions began making the loans in 2009 and have been asserting in court that they are owed $157 million as the result of “unfulfilled commitments by ITT to step in and make payments itself if losses surpassed certain thresholds,” according to the Indianapolis Business Journal.
But the IBJ reported the trustee, Deborah Caruso, is “turning the tables” and considering suing the credit unions and the advisory firm that crafted the program. In addition to seeking to invalidate the credit unions’ $157-million claim, the Indianapolis Business Journal said Caruso is alleging the defendants received tens of millions of dollars in “fraudulent transfers” that must be repaid and that they owe tens of millions of dollars in additional damages for “aiding and abetting fraud and breaches of fiduciary duty by ITT’s top brass, CEO Kevin Modany and Chief Financial Officer Daniel Fitzpatrick.”
The “aiding-and-abetting” allegations are based on Caruso’s statements to the court that the credit unions “knew or should have known” that ITT’s public disclosures about the loan program were misleading and concealed that liabilities on the loan guarantees were “escalating exponentially.”
An attorney for the credit unions told the Indianapolis Business Journal the trustee’s draft proposed complaint has no merit.
ITT Technical College shut down in September of 2016 and filed for Chapter 7 bankruptcy, listing assets of $389 million and liabilities of $1.1 billion.