Magazine article American Banker

IRS Slows Relief to Credit Unions in CD Mess: The Credit Union Journal

Magazine article American Banker

IRS Slows Relief to Credit Unions in CD Mess: The Credit Union Journal

Article excerpt

Dozens of credit unions and banks awaiting repayment for ill-fated investments with the defunct Bentley Financial Services will have to keep on waiting.

An initial payout of $220 million from the broker's estate to victims, most of them credit unions, has been held up by the Internal Revenue Service, which is exploring whether to file a claim on the $370 million of Bentley funds now being held in federal receivership.

"The court has approved the initial distribution but the receiver can't make any payments until the IRS signs off," said JoAn Sanders, the president of Cheney Federal Credit Union in Cheney, Wash., which has lost $10.7 million. "We're anticipating a substantial distribution over the next 30 days."

Frank Mayer, the Philadelphia attorney appointed receiver for the case, said he hopes to be able to make initial payments amounting to 59% of each claim over the next month or so. The Bentley receivership is the largest in Securities and Exchange Commission history, he said.

Bentley, a popular certificate-of-deposit broker for small banks and credit unions, and its sole owner, Robert Bentley, were found by a federal court last year to have operated a massive fraud in which the broker sold federally insured CDs in investors' names but invested the funds for itself. The SEC seized control of the brokerage and its subsidiaries last year, and the U.S. District Court for the Eastern District of Pennsylvania issued a permanent injunction against Mr. Bentley and his firm in December. …

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