Leggett, Fla. Regulator Settle
A Jan. 4, 2010 final agency order brought to an end a complaint that questioned whether there was a conflict of interest involving Leggett. The Florida regulator filed the complaint on April 30, 2009, stating he had engaged in unsafe and unsound practices and breach of trust among other accusations. Leggett filed a request for an administrative hearing on June 26, 2009.
According to the OFR, on Oct. 28, 2005, Leggett bought a Georgia home owned by his brother and sister-in-law for $435,000. He paid an $87,000 down payment and obtained a loan with Colonial Savings Bank for the balance. CU Members Mortgage Co., a loan servicer and underwriter, is a subsidiary of the bank and provided loan servicing to First Coast.
The OFR said on the same day the home was purchased, the U.S. District Court for the Northern District of Georgia entered a final consent order against Leggett's brother in favor of CSX Corp. for $1.9 million. On June 16, 2007, First Coast was served with a subpoena for the accounts records of Leggett, his brother and sister-in-law as part of the discovery process in a civil fraud action brought by CSX Corp. involving the Georgia home and other properties.
By February 2006, the family members had paid off the down payment and proceeds from the home's sale paid off the mortgage. They would later lease the property from Leggett, which was then transferred to the sister-in-law with Leggett's name remaining on the mortgage. On Oct. 31, 2006, the sister-in-law submitted an application for $353,000 to First Coast in Palatka, Fla., to refinance the Georgia home.
According to the OFR, the new loan was sent to CU Members Mortgage. On Nov. 6, 2006, Leggett e-mailed a First Coast loan manager saying that a mortgage application was coming from his sister-in-law and to "portfolio the new loan," the OFR said. CU Members noted that the application did not meet several Fannie Mae requirements, including not providing 12 months of mortgage payment history and the borrower not providing a business license as proof of her employment. A $40,000 appraisal of another property was also not included in the loan commitment, according to the OFR.
The regulator said Leggett "dismissed CU Members' concern," "performed a quick calculation to confirm that the amount of the new loan would not exceed the value" of the $40,000 property and told the loan manager to book the loan. The OFR said Leggett did not tell the loan manager the refinanced amount would pay off the Georgia loan. The new loan closed on Nov. 29, 2006.
The OFR said Leggett did not disclose details of the new loan and his interest in it and did not list the refinanced loan on any of the monthly loan exception reports to First Coast's board of directors for review.
On July 20, 2007, Leggett tendered his resignation and stepped down on Oct. 1, 2007 remaining as a consultant until December 2007.
Up until March 31, 2008, Leggett's brother and sister-in-law made timely payments on the new loan, according to the OFR. CU Members Mortgage foreclosed on the Georgia home on Dec. 2, 2008, resulting in a $161,000 loss.
In his June 26, 2009 amended petition to the OFR to request a hearing, Leggett addressed each of the regulator's counts. Leggett contended he was not involved in the financing or approval of the loan, remained transparent and was not attempting to defraud the CU. Leggett said one month after leaving First Coast, the state and an auditor did an exam "and nothing was raised about the loan in question. In fact no one had a problem with it until the loan went bad and the credit union foreclosed."
Leggett's attorney, D. Michael Chesser, did not return calls for further comment.
On Dec. 29, Leggett agreed to a consent agreement "to avoid the time and expense" of further proceedings "without admitting or denying that such grounds exist," according to the final order. Leggett also agreed to resign from any Florida financial institution affiliated party, including subsidiaries, affiliates or service corporations for five years. Leggett, who served as president/CEO of First Coast from November 2003 to Oct. 1, 2007, became president/CEO of Marietta, Ga.-based $770 million LGE Community Federal Credit Union in 2008.
At the time of the OFR complaint, Leggett had left First Coast, confirmed Janet Massin Anderson, assistant general counsel with the Florida state regulator.
"He voluntarily left for other employment in 2008," Anderson told Credit Union Times.
Leggett has served on the board of ATM network provider CU 24 in Tallahassee, Fla. LGE is served by CU 24 and PSCU Financial Services in St. Petersburg, Fla., according to NCUA data.