Twenty-eight borrowers are suing the failed Michigan-based Huron River Area Credit Union, the National Credit Union Administration (NCUA) (serving as the credit union's liquidating agency) and several real estate companies over speculative land deals in Florida, according to a report from the Credit Union National Association (CUNA).
The deals relate to construction loans for undeveloped projects in Cape Coral and Lehigh Acres, Fla. The NCUA, which took control of Huron River Area in February 2007, is attempting to collect on the loans.
Other defendants in the suit include Russ Whitney and his firm, the Whitney Education Group; Michael O. Kane and Gulfstream Realty; United Mortgage; the Construction Loan Co. (CLC); among others.
According to the suit, the defendants collaborated to sell, develop, finance, market and manage the real estate to and for students of the Whitney Education Group's "Millionaire University," which hosts seminars about real estate investment. The CLC, Huron River Area's agent for a Florida construction loan program, closed the loans, CUNA reports.
The plaintiffs argue that the assignments were illegal because the borrowers were not legal members of the credit union.
They additionally cite a November 2008 report from the NCUA Office of Inspector General that determined Huron River Area failed because, among other reasons, it "did not exercise due diligence by evaluating the third-party relationship held with its lender, CLC; allowed CLC to concentrate a majority of the credit union's loan portfolio in the speculative Florida real estate construction project; and failed to develop or follow adequate plans to guide the direction of the credit union and the Florida construction loan program."
CUNA notes that the lawsuit is similar to one filed by nearly 60 borrowers in July 2007. That suit, against Huron and Noralco Credit Union, included many allegations that were identical to the those in the current suit. Tampa law firm Conwell Kirkpatrick represented both the plaintiffs in the 2007 suit and the plaintiffs in the current suit.
In the 2007 lawsuit, the NCUA presented a D'Onech Doctrine argument, which essentially says the NCUA, when acting as a liquidating agent of a federally insured credit union, is protected by federal common law and the Federal Credit Union Act from suits of this type.