Raid on Illinois Exam Fund Halted by State Judge

SPRINGFIELD, Ill. – The state’s practice of siphoning dedicated funds for credit union and bank regulation into all purpose accounts to stave a budget crisis has been put on hold by a state judge here. Sangamon County Court Judge Leo Zappa granted a request by the Illinois Credit Union League and four financial trade associations to stop the removal of regulatory funds into general purpose accounts as pursued last year by the administration of Gov. Rod Blagojevich. In his March 11 ruling, Judge Zappa granted a temporary restraining order to the League and the four other plaintiffs holding the funds supported by examination fees needed protection. The League was joined by the Illinois League of Financial Institutions, Community Bankers Association, Illinois Mortgage Bankers Association and Illinois Association of Mortgage Brokers in filing suit against the state last December on grounds the removal of funds was unconstitutional. The Illinois League and the trade groups argued the diversion by the Department of Financial and Professional Regulation would injure supervision and force huge and unwarranted increases in examination fees to make up the difference in siphoned funds. Judge Zappa agreed finding that CUs would suffer irreparable harm by continuing to pay the fees, if such fees are subject to further transfers and are used for purposes other than regulation. The Illinois League complained that Blagojevich had taken $5 million from special CU funds, resulting in fee increases of 27.5% in 2003. Meanwhile, State Treasurer Judy Baar Topinka, acting two days before Judge Zappa, also blocked the removal of bank/CU funds on grounds the matter was in litigation and would be an “irresponsible fiduciary” move on her part to permit fund removal until receiving a court order. A spokesman for Topinka said the treasurer was also acting on a separate court suit also dealing with fund transfers filed in Chicago and which is slated to be heard by the Illinois Supreme Court. For months the Illinois governor has been engaged in a fierce political fight with members of the state legislature over removing 400 funds from various government agencies regulating a host of different industries. In a statement, Topinka called the state legislature’s 2003 granting of Blagojevich’s requests to transfer earmarked funds “unprecedented without legislative oversight.” Separately, the League said it was watching a 600-page bill in an Illinois Senate committee which implements the governor’s “executive order” on consolidating regulatory agencies. The League said it is meeting with top officials of the Illinois Department of Financial and Professional Regulation to ensure the bill “does not impair the dedicated Credit Union Fund.” -