Plaintiffs, including credit unions, are piling on to recover $4 million in stolen certificate of deposit funds in what could become a class-action lawsuit against Iowa-based MetaBank.
According to the July 1, 2008 complaint filed by $40 million Guardian Angel Credit Union, it deposited $99,000 with MetaBank in April 2005. The credit union renewed the CD in April 2006 and again in April 2007. On Jan. 25, 2008, MetaBank sent a letter to Guardian Angel stating that it recently become aware of unauthorized CDs issued under its logo and brand name. The suit also names Meta Financial Group Inc. in Buena Vista County, Iowa, which is the holding company of MetaBank.
In its May 14, 2008 SEC 10-Q filings, MetaBank acknowledged that “all evidence currently available indicates that [a] former employee ran this fraud for her own benefit and regularly took money from the MetaBank accounts to which the purchase monies had been wired.” The bank said after its investigation, it discovered that the employee had indeed sold fraudulent CDs using MetaBank's name and a form of CD to various financial institutions through an independent broker. The employee, who was not named in the SEC filing, instructed purchasers to wire the purchase money into one of a number of false accounts she had created at MetaBank.
On July 10, Charlene M. Pickhinke, a former MetaBank employee for 28 years, pled guilty in the U.S. District Court in Sioux City, Iowa, to money laundering, wire fraud, aggravated identity theft and making false statements on a bank's records, according to Matt Dummermuth an attorney with the United States Attorney's Office for the Northern District of Iowa. In her plea agreement, Pickhinke admitted that from 1995 to 2008 she sold more than 40 fake CDs while employed at MetaBank. She also admitted to opening two bank accounts using the names and Social Security numbers of deceased bank customers and used the accounts to launder funds. Pickhinke, who is free on bond pending sentencing, faces up to 82 years in prison, an $8 million fine and plus five years of probation.
Guardian Angel is waiting on a judge to decide if it can move forward with a class-action lawsuit, said Christopher Meier, an attorney with Cooper Cargill Chant P.A., who is representing the New Hampshire-based CU. Credit unions with claims can choose to opt in or out of the class action, he added.
“It's surprising to us that MetaBank has not stepped up to make their depositors whole,” Meier told Credit Union Times, adding that the parties involved are also seeking interest and collection fees. “This has implications for the entire financial industry.”
MetaBank spokeswoman Lisa Binder said the bank could not comment on litigation beyond its public documents. In its May 14, 2009, SEC filing, the bank said, “There are unresolved questions as whether, under what theory and to what degree the bank might be liable for the former employee's actions.”
When contacted last summer, Guardian Angel President/CEO Gerald Dumoulin said he could not comment on the case (CU Times, July 23, 2008). He did not respond to recent calls on the latest update involving MetaBank. Guardian Angel CU is seeking financial relief on several counts, including breach of contract, negligence and vicarious liability.
Meanwhile, more credit unions have come forward saying they had allegedly been duped, too. In November 2008, the $192 million Coreplus Federal Credit Union filed a civil action in the Superior Court for New London County in Connecticut seeking recovery of funds connected to a purported MetaBank CD. The case was voluntarily dismissed in March by both parties. Coreplus FCU did not respond to calls for comment.
The $26 million Hamilton Federal Credit Union also filed a suit in March against MetaBank in the U.S. District Court for the Northern District of California. It is currently seeking class-action status on the case. The most recent filing came from $219 million East Idaho Credit Union in the District Court, 7th Judicial District in Idaho. Neither credit union returned calls for comment.
Meier said in all, there are approximately 50 parties involved in the suit against MetaBank.
“The list of credit unions is not public yet, so I would have to call each one to ask permission,” Meier said on releasing the names of all the credit unions hit by MetaBank.
Claims of alleged CD losses through MetaBank go back to April 2008 when First Federal Bank filed suit against the financial institution in Texas State Court seeking recovery of its CD funds. That same month, another Texas bank, Frost National Bank, filed a similar suit. According to MetaBank, Frost National's case was dismissed without prejudice. The bank was hit with another suit in June 2008 from Methodist Hospitals of Dallas to recover a CD it purchased in May 2001. St. Paul Mercury Insurance sued on behalf of Lemont National Bank in Illinois to recover funds from a CD bought in 1999.
In its May 14, 2009, SEC filing, MetaBank said it has “received a number of demands from purchasers of these fraudulent CDs in addition to the lawsuits.”
“As the former employee was apparently using the funds of new victims to pay off the previous victims of her scheme, it does not appear at this time that she stole any bank money as part of this fraud. MetaBank therefore does not appear at this time to have suffered any direct loss as a result of the fraud, but it may suffer a loss to the extent it is exposed to liability for claims such as these,” the bank said in its SEC filings.
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking credit union news and analysis, on-site and via our newsletters and custom alerts
- Weekly Shared Accounts podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the commercial real estate and financial advisory markets on our other ALM sites, GlobeSt.com and ThinkAdvisor.com
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
