In a surprise move, Central States Mortgage Co., a Wisconsin-based CUSO and one of the nations's largest mortgage units servicing 250 CUs, suspended operations Monday following long running court litigation and a management shakeup involving the CUSO.
Central States, owned by 25 Wisconsin CUs and the Wisconsin Credit Union League, has been the object of civil suits following apparent losses in the secondary market.
While expressing surprise at the sudden closing of Central States' offices in the Milwaukee suburb of Wauwatosa, officials of the Wisconsin League stressed those losses from Central States' troubles "were realized and written down last year" by the CU owners.
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Meanwhile, the Milwaukee Journal Sentinel in reporting on Central States apparent collapse had earlier linked its troubles to the state's Feb. 27 takeover of the $190 million Prime Financial CU of Cudahy whose president/CEO Richard Koenig was fired. Prime Financial is a shareholder in Central States.
The Wisconsin Office of credit Unions had placed Prime Financial in conservatorship "under a new management structure" with Koenig ousted and Christine Dawe, a consultant named as interim CEO.
The Milwaukee Journal Sentinel on Monday noted that Central States "has been involved in numerous controversial dealings and recently filed a racketeering suit against Richard Jungen, its founder and former CEO. The suit against Jungen and other former executives charges they defrauded the company out of at least $15 million.
In addition, the Journal Sentinel said the FBI has been investigating the relationship between Central States and Interim Funding, a firm started by Jungen and other ex-employees which made bridge loans to borrowers that were later passed on to Central States. The chairman of Central States is Dean Wilson, president/CEO of Focus CU, of Wauwatosa, who was not immediately available for comment.
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