Sperry Associates FCU Wins Bond Case
In a case that has ties to one of the industry’s largest mortgage scams, Sperry Associates Federal Credit Union received a ruling in its favor over losses the financial institution said it suffered behind the scheme.
On March 1, Judge Dickinson Debevoise with the U.S. District Court of New Jersey said the $307 million credit union in Garden City Park, N.Y., was entitled to coverage from a fidelity bond that it purchased from CUMIS. Sperry claimed it lost $9.49 million through a mortgage scam instituted by CU National Mortgage.
“The trial court's decision is unfortunate and represents an overly broad interpretation of who is covered under the bond's employee dishonesty coverage. But in cases involving complex legal issues like this one, it is often up to the appellate courts to render a final decision, and we intend to seek appellate review in this case,” wrote Phil Tschudy, CUNA Mutual media relations manager, in a March 5 statement to Credit Union Times.
According to Sperry’s complaint, CU National sold 27 of the credit union’s mortgages valued at $9.49 million to the Federal National Mortgage Association without the credit union’s consent or knowledge. To conceal the theft, CU National continued to act as servicer of the loans. When the firm received Sperry’s payments, it transferred the funds to a clearing house and remitted them to FNMA, and a comparable payment was made to Sperry by transferring funds from a CUN/USM account. After the sale, the credit union continued to receive reports from the mortgage companies that showed it still owned the loans.