The National Credit Union Administration (NCUA), a Federal agency that oversees credit unions, is under scrutiny about the way it failed to properly supervise an Arizona institution linked to the indictments of PokerStars, Full Tilt Poker, and Absolute Poker in the U.S this month.
The Vensure Federal Credit Union in Mesa, Arizona was the only credit union on a list of 16 U.S. financial institutions to have an account seized by Federal officials. The dual indictments that resulted, one criminal and the other civil, charged the founders and officers of PokerStars, Full Tilt Poker, and Absolute Poker of conspiring to defraud banks by getting them to process credit, debit, and prepaid card transactions for their gambling sites.
At first, nothing about the small credit union stood out and the closure seemed unjustified. The NCUA’s data site reported its assets as of December 31, 2010 to be $2.7 million with 94 members. It also reported a net worth ratio of 33.52% and had net income of almost $592,000 for the 2010 calendar year.
But after further investigation, several red flags hinted at Vensure’s participation in what Federal prosecutors have described as an extensive and sophisticated fraud and money laundering scheme around internet gambling payments.
According to NCUA records, Vensure booked no loans in 2010, but collected over $1.8 million in fee income and paid out almost $700,000 in fees for professional services. In 2009, the credit union took in $436,000 in income and paid out $82,000 in professional fees despite only booking one loan, an unsecured line of credit for just over $5,000 at 5% interest.
There were also questions regarding the institution’s members. In 2009, Vensure claimed 74 members with at least 74 share accounts and the credit union reported paying out $11,651 in interest for those accounts. But in 2010, Vensure reported paying no interest on share accounts even though its members had climbed to 94 and the number of potential members had increased from 150 to 1,500.
“Because it was illegal to process their internet gambling transactions, the poker companies had difficulty in identifying ‘transparent’ processors,” the Government indictment said. “Chad Elie, the defendant, and his associates were, however, able to persuade the principals of certain small, local banks that were facing financial difficulties to engage in such processing. In exchange for this agreement to process gambling transactions, the banks received sizable fee income from processing poker transactions as well as promises of multimillion dollar investments in the banks from Elie and his associates.”
The credit union only had one account seized by the Government, which was in the name of the Trinity Global Commerce Corp. But because the institution was closed after the seizure, the account is believed to have been of significant size. Therefore, it’s unlikely that the credit union could have remained liquid without the Trinity Global Commerce Corp. account.
The NCUA is now facing questions because its website said Vensure’s call reports from 2010 were validated. Critics are wondering how the ongoing gambling transactions had gone unnoticed by the agency.
Todd Harper, NCUA’s Director of Public and Congressional Affairs, told the CU Times that validating the call report doesn’t necessarily mean that it was studied carefully. “These call reports pass NCUA’s error validation process, which compares the data submitted to approximately 680 error edits,” Harper said.
“Call reports are validated by either the assigned NCUA examiner or the state supervisory authority. Once a credit union submits their call report, the examiner or SSA may review the Financial Performance Report or other reports comparing cycle data prior to validation.”
Stay tuned to Poker News Daily for continuing coverage of the crackdown of online poker sites in the U.S.