INDIANAPOLIS–A new report from NCUA’s Office of Inspector General (OIG) confirms the reason behind the first CU liquidation of 2021 was due to alleged fraud. The report also lists the grounds for liquidation related to a different credit union.
As CUToday.info reported here, in late March the agency liquidated Indianapolis’ Newspaper FCU and assigned most of its shares to Elements Financial FCU.
In January, NCUA had conserved the then $6.604-million Indianapolis’ Newspaper FCU, which had 1,155 members. INFCU serves various select employee groups in the greater Indianapolis area.
Indianapolis’ Newspaper FCU showed a whopping loss of $852,232 on its Sept. 30, 2020 call report, with NCUA saying it made the move at the time “because of unsafe and unsound practices at the credit union.”
The agency said it has retained a portion of Indianapolis’ Newspaper Federal Credit Union’s shares. Members are being urged to contact NCUA’s Asset Management and Assistance Center to see if their shares have been retained.
NCUA further said it will retain all the Indianapolis’ Newspaper FCU’s loans and will use Statebridge Company to perform loan servicing.
Alleged Loan Wrongdoing
Now, in its updated report, the OIG said as part of its material loss reviews related to the NCUSIF that the formerCEO and manager are alleged to have committed fraud relating to the credit union’s loan portfolio.
The report notes that, in the P&A, Elements Financial FCU assumed the corporate cash account and all insured regular shares and share draft deposits “except for those involved in the alleged fraud scheme, or those accounts with six dollars or less in their account.”
The OIG said the failure of Indianapolis’ Newspaper FCU is estimated to have cost the NCUSIF $2.29 million. It is noted in the report that material loss reviews are typically not done when the fund loss is less than $25 million, but in this case the circumstances warranted the additional review.
Subprime Issues
The OIG report also said the former Twin States FCU in Columbus, Miss., was liquidated in March, after being merged into Mutual Credit Union as the result of a cash assistance agreement, due to being declared insolvent with no prospect of recovery due to high loan losses due to subprime lending.
The estimated cost to the insurance fund from that failure was $852,821.
The full OIG report can be found here.