Central States Receiver Named; Suit Against Former CEO Is Dropped

Central States Mortgage Co., the Wauwatosa, Wis. CUSO now in bankruptcy court, dropped its long-standing racketeering lawsuit last week against its former CEO and founder. The court moved ahead with naming a receiver for the firm, which until its closure last month had serviced 250 Midwest CUs.Though dismissing the 2008 suit against Richard Jungen, a part-owner of CSMC, the court-appointed receiver, Milwaukee bankruptcy attorney Michael Polsky, could re-file the petition, although defense attorneys are hoping he will decide the suit lacks merit.The actions by a Milwaukee County Circuit Court judge are expected to clear the way for dissolution of the firm owned by 25 Wisconsin and Illinois CUs and the Wisconsin Credit Union League. The CUSO ran into large mortgage losses over the last year.One apparent result was the conservatorship last month of Prime Financial CU, Cudahy, Wis., an CSMC investor.One of the shareholder groups in CSMC is the Wisconsin Credit Union League, whose chairman, Focus CU President/CEO Dean Wilson, took helm of the CUSO last December.The Milwaukee court, according to press reports, gave Polsky, a partner in the Milwaukee firm of Beck, Chaet, Bamberger & Polsky, the right to re-file the CSMC lawsuit, which alleged Jungen and others tried to defraud CSMC of $15 million through a funding scheme.Attorney Stephen Kravit, who is representing Jungen, has vigorously denied the fraud claims, accusing CSMC of being a “lawless company” that took illegal actions by a bitterly splintered board.–[email protected]