INDIANAPOLIS -- After a nearly three-year battle between the former Jet Credit Union and John V. Loudermilk, its former CEO, a judge has ordered the credit union to pay $3.4 million for illegally freezing the executive's accounts.

The case goes back to August 2003 shortly after Loudermilk retired after 43 years from Jet CU, which has since merged with Credit Union 1 in Rantoul, Ill. Jet filed suit against Loudermilk for "conversion, unjust enrichment and breaching his fiduciary responsibility to the credit union" seeking $3 million in alleged defaulted loans and the amending of his retirement package. Jet then froze Loudermilk's accounts in October 2003 until Judge Thomas Carroll ordered them to be released in May 2004. Loudermilk filed a counterclaim against the CU alleging criminal conversion.

In August, Carroll ruled that the CU indeed committed criminal conversion by exercising unauthorized control over Loudermilk's business and personal accounts. The $3.4 million judgment is the first half of the litigation, Gregory Hahn, an attorney with Tabbert Hahn Earnest & Weddle and representing Loudermilk, told Credit Union Times. The second part involves the CU "unilaterally confiscating over $1 million in deposits with the credit union."

"Most of the money was not his but belonged to his wife and businesses he had interests in," Hahn said.

Jet CU also said that Loudermilk was negligent with certain loans and is seeking recovery. Hahn said Loudermilk was not directly involved in the loan transactions, which he estimates are between $2.2 and $2.3 million.

"We think the facts are going to show that not only was he not responsible [for the loans] but he was not involved. They were done by a loan officer," Hahn said.

A trial addressing the loan litigation is set for December. According to Rob Daniels, another attorney representing Loudermilk, the majority of Jet's claims have been dismissed. The December trial will center on various businesses including Premiere Steel and Adventure RV, which Jet CU claims were owned by Loudermilk and transactions were commingled with the credit union. Daniels said the businesses were owned by other persons, not Loudermilk and he is not responsible for any loans that have yet to be paid off or have gone into default.

An attorney representing Jet CU said they are moving forward with an appeal of the $3.4 million judgment.

"We are disappointed with the ruling," said Christian Jones, attorney with Barnes & Thornburg. "We have initiated an appeal of the decision."

Loudermilk first contacted Credit Union Times in 2004 to offer his take on what transpired (CU Times, Feb. 25, 2004). He did not respond to an interview request for reaction to the latest judgment. --msamaad@cutimes.com

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Loudermilk to Receive $3.4 Million From Former Jet Credit Union for Illegally Freezing Accounts

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