The sudden closing of Central States Mortgage Co., a Wisconsin CUSO with 25 CUs and the Wisconsin Credit Union League as shareholders, set off a new round of charges Tuesday.
In a blistering four page statement, Milwaukee attorney Stephen Kravit accused the CU owners of mismanagement and creating a false "crisis" to suspend operations following what he said are libelous claims contained in so-called "racketeering" lawsuits blaming the former founder and CEO of Central States, Richard Jungen, of a $15 million fraud. The claim has been denied by Jungen, Kravit's client.
"Until last Thursday, CSMC reported positive cash flow to its clients and employees and a rosy plan for the future," Kravit wrote complaining that everything "changed Friday" when Members United Corporate Federal Credit Union of Warrenville, Ill., demanded payment of a defaulted $33 million loan. A spokeswoman for Members United in Albany, N.Y. ,where it also has offices, declined comment "on matters in litigation."
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For its part, the chairman of Central States, Dean Wilson, who also is president/CEO of Focus CU of Wauwatosa, said only the "decision to close was a difficult one" but necessary "in the best interest of our shareholders."
"While the firm is no longer actively originating loans for the 250 credit unions it had served nationwide, some staff remains on board to help transition those operations to other providers," said Wilson. He did not name the providers but said "the firm will continue servicing loans for credit unions."
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