The Indianapolis Business Journal is reporting that the bankruptcy of ITT Technical Institute (ITT) continues to haunt Elements Financial Federal Credit Union, formerly called Eli Lilly FCU.
Elements Financial partnered with six other credit unions to provide loans to students attending ITT. However, the loans performed poorly causing a $14 million loss for Elements Financial in 2012.
Now, the bankruptcy trustee in a court filing is considering suing the credit unions and the advisory firm that crafted the loan program.
The draft complaint alleges that lenders received tens of millions of dollars in “fraudulent transfers.” The trustee contends that these payments to lenders occurred at a time when ITT was insolvent or contributed to ITT's insolvency. The draft complaint also alleges that lenders engaged in aiding and abetting fraud.
In addition, the trustee is seeking to invalidate claims from lenders claiming that they are owed $157 million as a result of unfulfilled commitments by ITT to step in and make payments itself if losses surpassed certain thresholds.
The trustee filed the draft complaint in an effort to block the credit unions’ efforts to seize $8.8 million in cash in an ITT account.
Read the story.
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