Two years ago, AEA Federal Credit Union’s future looked bleak as it nearly succumbed to the greed of a lending officer who took the cooperative to the brink of collapse.
It was in December 2010 when the NCUA stepped in to place the $231 million Yuma, Ariz., credit union into conservatorship after an 11-month FBI investigation revealed that William Liddle, who worked as vice president of business services, was the mastermind behind the approval of business loans in an apparent kickback scheme.
During his time at the credit union, Liddle approved more than $25 million in business loans, according to an indictment from a Phoenix federal grand jury. Liddle, along with his wife Rhonda, and Frank Ruiz, an Arizona businessman, were arrested Dec. 2, 2010 for their roles in approving questionable AEA business loans in exchange for nearly $1 million, according to the Arizona Office of the United States Attorney.
Ruiz used the loans to fund his businesses, many of which are now bankrupt. He testified against Liddle last year, was ordered to pay more than $6 million restitution to AEA and was sentenced to two years in prison. On Jan. 31, the NCUA officially banned Liddle from participating in the affairs of any federally insured financial institution.
AEA said Liddle was hired in November 2004 to develop and manage a business services program based on his formal education and professional expertise in commercial lending and international business. Liddle resigned from his position in December 2009 to manage his business, Desert Capital Advisors LLC, according to the credit union.
AEA said inconsistencies were detected following Liddle's departure prompted an audit of business lending activities conducted by an executive committee appointed by AEA officials.
The credit union’s business loan losses caused a drop in capital, prompting the NCUA to require preparation of a five-year net worth restoration plan. To keep afloat, the credit union also had to close one branch and reduce staff by more than 35%. Back then AEA had $22 million in delinquent business and construction development loans and $45 million in delinquent member business loans excluding agricultural loans. Total outstanding loan balances subject to bankruptcy were $37.7 million. All loans charged off due to bankruptcy to date total $6.9 million.
In the end, Liddle was convicted in 2012 of conspiracy, fraud, wire fraud and transactional money laundering. He was sentenced to 15 years in prison, five years of supervised release and ordered to pay restitution in the amount of more than $25 million.
After two years of righting the ship, it appears AEA is finally emerging from the dregs of financial losses. In January, the NCUA said several new services and more efficient operations helped AEA improve its financial conditions last year.
The credit union posted 2012 year-end net income of $3.15 million, according to the agency. Total assets at the end of the fourth quarter stood at $231 million, and the net worth ratio improved by 137 basis points from year-end 2011, ending the fourth quarter at 4.02%, the NCUA said.
“We reduced expenses, streamlined operations, retooled infrastructure, introduced an array of new services and continued the process of returning AEA to the core credit union business model,” said Elizabeth Whitehead, NCUA Region V director and agent for the conservator. “We see significant progress in all of these areas, and we are very pleased with the credit union’s positive performance in 2012.”
Indeed, when AEA was placed in conservatorship at the end of 2010, the NCUA’s top priorities back then were to reduce loan losses by aggressive collection efforts and prudent lending practices, control expenses and build net worth, said John Fairbanks, NCUA public affairs specialist.
“The decision to conserve AEA enabled us to continue normal credit union service to members with experienced management in place correcting previous service and operational weaknesses,” Fairbanks said.
The financial institution also joined the shared branching and CO-OP ATM networks in 2012, creating 36,800 additional service sites for members.
It is the goal to release AEA from conservatorship this year, the NCUA said. Whitehead said when the time comes, management of the credit union will be returned to a highly capable local board of directors. Fairbanks said that release date decision will be made by the NCUA board. A specific month or quarter is not known at this time, he added.
In a letter to members posted on the AEA website, Brian Mendivil wrote that he is the interim CEO. He previously served as AEA's executive vice president for the past two years and said he has been actively involved in AEA’s re-emergence as a strong financial organization serving residents of Yuma and La Paz counties.
Mendivil succeeds Tom Martin, who held the position since December 2010. At press time, the NCUA had not confirmed Mendivil’s appointment. “As your interim CEO, I will put over 21 years of financial management experience to work for you. My commitment is to continue steering AEA Federal Credit Union on its positive course, while maintaining a members-first philosophy,” Mendivil wrote.
Established in 1942, AEA operates five branches. Membership is open to individuals and their family members who live, work, worship or attend school in Yuma or La Paz counties in Arizona.
The Mountain West Credit Union Association, which represents 154 credit unions in Arizona, Colorado and Wyoming, is optimistic about AEA’s future.
“The progress that AEA Federal Credit Union has shown over the last year is very encouraging. We are both excited and hopeful about their continued growth and success,” said Joy Audet, MWCUA director of corporate communications.