Citing a “management issue,” the Wisconsin Office of Credit Unions took control of Prime Financial Credit Union on Friday, dismissing its board of directors and appointing Chris Dawe, a recently-hired interim president as its agent to conduct the credit union’s business.
Richard Koenig, Prime Financial’s former president, was dismissed by its board of directors in December, state officials said. No employees were dismissed as part of the state takeover.
“This was a management issue,” said Catherine Haberland, a state Office of Credit Unions spokesperson. “There were concerns about the management. The board was let go and we are now managing it.”
“The president was removed by the board in December,” said Kim Brilowski, a chief examiner with the office.
Haberland and other Office of Credit Unions officials said they could not further elaborate on what led to state takeover at Prime Financial. However, they did say the state office is conducting on ongoing investigation there.
Despite the investigation and the dismissal of Prime Financial’s board of directors, state officials say the credit union’s ongoing operations should be seamless for customers.
“Anyone should be able to go in there and not see any difference,” Haberland said. “And any money (deposited) in the credit union is insured to at least $250,000.”
After the state completes its investigation at Prime Financial Credit Union, it will likely appoint a new board of directors from its members, Brilowski said.
The Wisconsin Office of Credit Unions last took over an operating credit union in 2001, when it oversaw operations at the former Fond du Lac County Employee’s Credit Union. That credit union was later merged into Marine Credit Union.
The state believes that Prime Financial Credit Union will not need to merge with another credit union, said Karen Mack, a financial examiner supervisor.
“We fully anticipate that this credit union will be able to be returned to a functioning board,” she said.
Richard Koenig, Prime Financial’s former president who was dismissed in December, was also formerly the chairman of Central States Mortgage. He resigned that position in December.
In February, CSMC Inc., the Wauwatosa-based parent company of Central States Mortgage, filed a lawsuit against its founding shareholders, with allegations of racketeering and wire fraud activities that cost the company more than $15 million in losses.
In a civil case filed in Milwaukee Circuit Court this week, CSMC alleged that former chief executive officer Richard Jungen, his wife Elaine Jungen, who also served as president and secretary, former chief financial officer Jerome Poehnelt, former senior vice president of sales Kevin Dwyer, and former vice president for production Charles Miller, intentionally created and took part in a fraudulent scheme.
The complaint alleges that the Jungens, Poehnelt, Dwyer and Miller founded Interim Funding LLC in 1997. Interim is an end purchaser of mortgage loans that were originated by CSMC. According to the suit, the defendants, through their controlling interests in both organizations, caused CSMC to purchase delinquent or foreclosed mortgages. Many of the distressed or foreclosed mortgages were then repurchased by CSMC because of a funding scheme created by the defendants, the case states.
Richard Jungen was fired from CSMC last July 31, while Elaine Jungen, Dwyer and Miller were fired on Nov. 7. Poehnelt was fired on Sept. 15.
CSMC told BizTimes Milwaukee last summer that Richard Jungen had retired from his position as CEO.
In the case, which has been assigned to Judge Jean Di Motto, CSMC seeks more than $15 million in damages, plus an additional amount in attorney fees and punitive damages.
Central States Mortgage is owned by 25 credit unions and provides mortgages to those credit unions. Prime Financial Credit Union is one of the investors in Central States Mortgage.