PHOENIX – A federal court yesterday dismissed a suit by a Yuma developer who claims AEA FCU, which is now being run under conservatorship by NCUA, illegally foreclosed on three of his properties that were financed as part of a massive member business loan fraud.
Todd Burch claimed in a 2011 civil suit that AEA (now NCUA, which adopted all legal rights to the one-time $410 million credit union) engaged in fraudulent misrepresentation, breach of of good faith and fair dealing and defamation when it foreclosed on $34 million of MBLs that financed his Yuma projects. The same court had earlier dismissed Burch’s claims that AEA drove him into bankruptcy by cutting off his line of credit as the credit union itself was going under.
Burch’s loans to finance the properties were arranged by William Liddle, the head of MBLs at AEA, who was sentenced to 15 years in prison last month for accepting more than $1 million in bribes in exchange for approving $60 million in risky MBLs.
Yesterday’s ruling by the U.S. District Court of Arizona gives NCUA clear path to the three properties, including the Tucson Ranch subdivision and Cactus West residential developments, which Burch had tried unsuccessfully to block by filing lis pendens. AEA purchased the properties at foreclosure sales in February.
Yesterday’s ruling also awarded NCUA $15,000 in damages and legal fees.
The MBLs fraud has nearly sunk the credit union, chartered to serve the Arizona Education Association, and left it with negative net worth. The credit union is only operating because of an emergency $20 million loan from NCUA, which has been operating it under conservatorship since December 2010.
Burch claimed the credit union cut off his line of credit and sued him for collection of his loans in breach of promises made by Liddle as the state’s real estate crisis was peaking, driving him into bankruptcy. The developer argued the AEA loans themselves were illegal and unenforceable because they violated the Federal CU Act’s limits on loans to one borrower, which are 10% of the "credit union's unimpaired capital and surplus.”
Burch said AEA did not cut off his credit because the developer was failing but because the credit union itself was failing.