Lawsuit Alleges Fraud in Florida

On September 9, a lawsuit was filed in Federal Court against the NCUA, as liquidating agent of Huron River Area Credit Union, and others.

The 53-page complaint reads like a Carl Hiaasen novel and alleges fraud, breach of fiduciary duty, and criminal acts on the part of Huron River Area CU (Huron) and other defendants associated with speculative real estate transactions in Southwest Florida.

The following discussion highlights just some of the allegations in the lawsuit.

The complaint alleges that Construction Loan Company fraudulently assigned construction loans to Huron even though Huron and/or its agents knew that the borrowers did not meet the eligibility requirements for membership in Huron. The lawsuit claims that Huron and Construction Loan Corporation (CLC) illegally and without authorization altered and changed the membership applications that the Plaintiffs executed at the closing on the construction loan. The tampered application made it appear that the Plaintiffs were seeking membership “through Learn & Earn Credit, LLC, an entity unknown to the Plaintiffs.”

Second, the complaint claims that loan documents were fraudulently drafted to falsely identify the property as a primary or/principal residence when in fact the properties were investment properties. When Millionaire University (MU) students raised questions about the loan document being classified as a primary residence, they were advised to disregard the primary residence language and that the lender had taken care of that issue for them. The complaint states that “CLC and Huron drafted the documents in such a manner in order to mischaracterize the true nature of the loans and to avoid statutory and regulatory limits on business loans applicable to Huron River Area Credit Union.”

The lawsuit further alleges that CLC, Huron and United Mortgage, as well as the MU Partners, knew the appraisals upon which the construction loans were based, as well as the present market value representations in the loan applications, were fraudulent and grossly exaggerated. The complaint states that MU Partners set the appraisal price by first determining how much money the Defendants would make through the sale of the lot, the construction of the house and the financing of the purchase, including excessive fees. After the MU Partners know the amount, an appraisal by Real Pro/Wittig or Hot Appraisals/Seibert was arranged, which would value the property high enough so that the construction loan amount would be 80 percent of the appraised value.

In addition to seeking damages from the various defendants, the plaintiffs are asking the court to declare that the assignment of the notes and mortgages from CLC to Huron are illegal and void. Moreover, plaintiffs claim that allowing NCUA as liquidating agent for Huron to enforce the mortgages and notes would be unjust as said notes and mortgages are illegal contracts and thus not assets of Huron River Area Credit Union.

If the allegations in the complaint are true, then Huron and other parties conspired to commit fraud on a massive scale.