In its latest assault on credit unions' the tax exemption, thebanking lobby has seized on a suit filed by the NCUA to recoverlosses in a 2009 Nevada credit union failure as evidence CUs arehanding out loans to nonmembers on a broad scale.

The banker attack stems from $1.4 million in defaulted loansextended to three borrowers at the failed $98 million Ensign FCU ofHenderson and which figure in an NCUA recovery suit filed Sept. 30in a Las Vegas federal court.

The tax exemption blast was issued by a leading American BankersAssociation spokesman, Keith Leggett, vice president and senioreconomist. Leggett, in his “Credit Union Watch” blog, cited pressclippings regarding the Ensign nonmember loans, which wereapparently extended through a broker.

Making no comment on the Leggett blast or on the NCUA suititself, the agency said, “Whenever a credit union failure occurs,we evaluate all outstanding obligations and make a determination asto whether to take legal action.”

In this case, involving now vacant property in downtown LasVegas, the decision to file suit “is based on the specific factsand circumstances in each case; there is no blanket policy onNCUA's part,” said John McKechnie, director of congressional andpublic affairs. The suit seeks recovery of loan payments based onpersonal guarantees of the borrowers, led by Isaac Norman, a LosAngeles investor.

An article in The Las Vegas Review Journal told of how theNorman group had been led by Ensign to an unidentified broker toborrow the $1.4 million for an office building, which later fellvictim to the city's real estate meltdown.

The article focused primarily on the problems borrowers at bothbanks and CUs experience in dealing with the NCUA and the FDIC intrying to reach settlements. Norman charged that the NCUA “lent adeaf ear” to discussions about the loan.

Separately, the FDIC has forecast it might be filing moreborrower suits of its own in light of the continuing spate of bankfailures.

In his blog, Leggett of ABA questioned “how did these partnersqualify to get a $1.4 million loan from Ensign FCU? Moreover, thisis not the first instance of loans going to people who were notcredit union members. NCUA has noted that loans went to people whowere nonmembers of Norlarco CU and Huron River Area CU and thatboth credit unions subsequently failed.” He added, “This is verytroubling and requires a closer examination of their preferentialtax treatment.”