A state appeals court affirmed a lower court ruling Wednesday allowing NCUA to foreclose on 17 homes funded by the failed Michigan credit union Huron River Area FCU in two South Florida developments financed through a get-rich-quick scheme known as "Millionaire University."
NCUA had inherited the suit after it liquidated the one-time $360 million credit union, one of three to finance more than 2,000 homes in the two developments, known as Cape Coral and Lehigh Acres. All three credit unions financing the Florida projects, which included Colorado’s Norlarco CU and New Horizons Community FCU, failed. The three 2007 failures left NCUA owning more than 1,700 properties in the two developments.
The borrowers, from California, Maryland, Massachusetts, Tennessee, Florida, Illinois, Texas and Michigan, claim that they were fraudulently allowed membership in the Ann Arbor, Mich., credit union in order to qualify them for construction loans. As a result of the membership fraud, they claimed their loans were illegal and thus, void.
Also named as defendants in the suit was TV pitchman Russ Whitney and his Whitney Education Group, which sold the get-rich-quick real estate speculative scheme to investors across the country through its "Millionaire University" program. Under the program, enrollees were sold undeveloped plots in the two projects just east of Naples, Fla., that were purported to be preleased, and promised a return of more than 14% in a year's time.
In issuing its ruling, the state appeals court, Florida’s Second District Court of Appeal, did agree to reopen the question of lawyers’ fees and sent it back to the lower court because the lower court never held a hearing on attorneys’ fees.
The failure of Huron River Area FCU cost NCUA an estimated $100 million to resolve, including $40 million paid to Detroit Edison CU to take over the remnants of the failure as part of a purchase and assumption deal, and left NCUA with $220 million of the Cape Coral and Lehigh Acres loans.
