Will Everest Continue to Pay if a Settlement with Sutton, et al is Reached?
Everest has sued Sutton and other Centrix principals for various frauds and breach of contract, while Sutton claims certain PMP loans owned by credit unions are excluded from DPI coverage. Sutton's personal guarantee to Everest of Jan. 2004 that Founders Insurance Co. LTD, which he controlled, would cover certain DPI claims payments resulted in Everest demanding some $76 million last January. Sutton responded with a declaratory judgment in Colorado (where Centrix was based) claiming he had no responsibility for payment, because Everest procured his signature on the agreement through fraud. The company has "engaged in a continued pattern of overreaching and coercive conduct," his complaint stated.
The NCUA's letter to Everest, which Credit Union Times has received through a Freedom of Information Act request, expresses concern over Sutton's claim that DPI coverage was conditional on continued Vendor Single Interest (VSI) coverage, which Centrix allowed to lapse in July 2005. "As far as we know, no one at Centrix informed these credit unions about the VSI lapse before Oct. 2006," wrote NCUA General Counsel Robert Fenner. The lapse became evident in Centrix' bankruptcy filing. The agency stressed that Everest has "a legal obligation" to continue to pay DPI claims and urged Everest to contest Sutton's claims.
Credit Union Times has learned recently of a potential settlement that may markedly alter the Centrix situation.