NCUA Liquidates South Carolina CU as Other Issues Continue in Court

The road that led to the involuntary liquidation of the $2.4 million Community Owned Federal Credit Union in Charleston, S.C., announced Friday evening by the NCUA began in February 2019.

At that time, Vincent Terry met with COFCU claiming he was a licensed broker and underwriter of real estate mortgages for sale to the secondary market, that he owned a licensed company to underwrite or broker mortgages, that another company had agreed to purchase “all of such loans” and that COFCU’s initial funding of those loans would be fully reimbursed, resulting in negligible financial risk for the credit union.

The problem, however, was that Terry’s claims and others were not true, according to the NCUA’s investigation of the credit union’s affairs after the federal agency conserved it last year and later filed a lawsuit against Terry to compel him to hand over documents.

COFCU’s June 30 Call Report showed its total loan charge-offs amounted to $999,576, including $851,998 in other real estate loans or lines of credit, $142,807 in all other loans and $4,771 in used vehicle loans. At the end of the second quarter, the credit union posted a loss of $445,646, according to NCUA financial performance reports.

What’s more, the federal agency asserted in court documents that if some or all of its allegations against Terry were proven, then it could lead to criminal charges such as bank fraud, mail and wire fraud, and making false statements to a federally insured financial institution.

On Friday evening, the NCUA released a statement that the credit union was insolvent and had no prospect for restoring viable operations. The federal agency conserved COFCU in January. The 55-year-old credit union employed three persons and served more than 700 members.

In February, the NCUA filed a lawsuit against Terry to compel him to comply with a subpoena for documents and other information. For months, Terry snubbed the NCUA’s subpoena until a federal judge in U.S. District Court in Charleston authorized the NCUA in July to ask Terry questions, request documents and take his deposition. The judge also issued a court order to compel Terry to comply with the NCUA’s authorization.

In response, Terry filed a court document last week stating that he wished to remain silent and exercised his rights under the Fifth Amendment of the Constitution that protects an individual’s right against self-incrimination.

Whether the Fifth Amendment right will hold up in this case, however, is another issue. The NCUA argued in court documents that Terry’s blanket and unsupported assertion of his Fifth Amendment privilege is unavailing.

The federal agency also requested that court sanctions be imposed on Terry for his alleged “improper invocation of the privilege and his intentional frustration of these proceedings.”

A court hearing regarding this dispute has been scheduled for Sept. 29.

COFCU’s demise began on Feb. 15, 2019, when Terry created Westminster Mortgage of America and registered it with the South Carolina Secretary of State. But it turned out that neither Terry nor WMOA possessed a valid license to underwrite or broker mortgages. Though the company had a virtual office address, it was a front to make it appear as if it were operating from a physical office location in Charleston, according to the NCUA’s investigation.

Terry allegedly told COFCU that Nations Direct Mortgage had agreed to purchase the credit union’s loans and that its initial funding of these loans would be fully reimbursed, resulting in negligible financial risks.

But Terry allegedly later admitted to the COFCU board of directors that he and WMOA largely generated and/or underwrote unsecured or virtually unsecured loans to himself, relatives, friends and associates identified in court documents as “T.A. and “J.D./J.G.” Almost all of those loans are in default and none of them were ever assumed by Nations Direct Mortgage or any other legitimate entity, according to the NCUA’s findings.

Moreover, J.D./J.G. obtained through WMOA a substantial real estate loan from COFCU for property in Fulton County, Georgia. This loan was secured by a Security Deed on Oct. 22, 2019, in favor of COFCU.

However, on Dec. 17, 2019, T.A. executed a cancellation of the security deed for the property. The NCUA has accused T.A. of fraudulently representing himself as COFCU’s EVP in the cancellation of the document, which was filed that same day in Fulton County. Two days later, J.D./J.G. executed a Quit-Claim Deed, transferring the real estate to Terry, but he refrained from recording the Dec. 19, 2019, Quit-Claim Deed to himself until May 18, 2020. This allowed, in the interim, for J.D./J.G. to use the apparently unencumbered Fulton County real estate as collateral to obtain a $130,000 loan from another financial institution, according to the NCUA’s court documents.