Conference 7.286::dcu

    any new information on this topic??
    
    i sortof expected this to be a hot topic of discussion??
    
     - Bob
    

    
    Guess it got overshadowed by the special meeting and its subsequent
    fallout...
    
    Somebody who has Digital phone books from many years back has sent me
    mail and stated that this persons name does not appear in any of them. 
    Not sure if that means much though.
    
    More investigation needs to be done and that's planned for next week. 
    Courthouses and Registries of Deeds are interesting places and a wealth
    of information.  Amazing what you can find out there.

>    The name that appeared on the
>    mortgage filed at the registry of deeds was that of Barnstable Credit
>    Union.  However, to date I have found two exceptions to this pattern. 

	Begin speculation:

	Probably because the two exceptions *were* DCU members, and 
	hence the loan could be made to them. I would expect that
	in the other cases, the recipient of the loan was not a 
	DCU member, and so the loan (err, "investment") was made as 
	a participation loan to get around the requirement that loans 
	be made only to DCU members.

	End speculation.

				Tom_K

Does this person or organization still exist.

Someone could call ??  }8-)}

Bill

    
    RE: .3
    
    So you think John Schulenberg (straw borrower and brother-in-law of
    defendent in Barnstable CU suit) was a DCU member when these loans
    totalling $2.65 million were made?  There were 2 loans made to this one
    person (that I have found so far), not several people.
    
    Any ideas on how we could go about confirming whether he was or was
    not?
    

>	So you think John Schulenberg (straw borrower and brother-in-law of
>	defendent in Barnstable CU suit) was a DCU member when these loans
>	totalling $2.65 million were made? 

	Well, I figure that if he wasn't, they would have used the route 
	of going through Barnstable, like they did with the other loans.

>	Any ideas on how we could go about confirming whether he was or was
>	not?

	Not really, and I don't think it is that important, given the
	work-around used for the other loans.

						Tom_K

Well, as everyone already knows, I'm not a lawyer, but my reading of:

>    "I, JOHN L. SCHULENBERG, Trustee of NEW ADVENTURES REALTY TRUST II,
>    under Declaration of Trust dated Jan. 31, 1986, and recorded herewith,
>    of P.O. Box 124, Barnstable, Barnstable County, Massachusetts, 02630,
>    for consideration paid, grant to DIGITAL EMPLOYEES' FEDERAL CREDIT
>    UNION, of 141 Parker Street, Maynard, Middlesex County, Massachusetts
>    01754, with MORTGAGE COVENANTS, to secure the payment of ONE MILLION
>    THREE HUNDRED TWENTY-FIVE THOUSAND and 00/100 ($1,325,000.00) DOLLARS in
>    or within NINETY (90) days with interest, as provided in a note of even
>    date.

Mr. Schulenberg, acting in his capacity as trustee of a real estate trust,
is taking out a loan from DCU acting on behalf of the trust.  I see this as being
no different than the CEO or president of a corporation signing a loan document
on behalf of her corporation.  

>    So the questions are 
>    
>    	"Was John L. Schulenberg a DCU member?"
I'll wager not, but it wouldn't matter, since DCU will claim that they
were making an investment in a real estate trust, not granting a personal
loan to a non-member.  If the paperwork didn't mention the realty trust, but
just him personally, it would be a different matter.

>    	"Since DCU granted these mortgages, what verification did 
>    	 it perform on the applicants?"
That's a good question...however, given that this was back in the mid 80's
when the market was still good, the trust might have been credit qualified
for real.  Nevertheless, it would be interesting to see what, if any,
verification they did.

The thing that's annoying here is that it looks to me like this particular
transaction was proper in terms of the scope of things that DCU was, AND STILL
IS, able to invest money.  I would hope that the BoD will take a long hard look
at it's investment policies and make appropriate changes to protect DCU from
speculative loans in real estate ventures in the future.

This is also another case of DCU investing it's money in ways that the BoD claimed
not to be doing back in 1987-88.



./chris

    
    What these loans APPEAR TO BE are direct loans to a non-member of DCU. 
    They APPEAR TO BE originated by DCU.  If these appearances are correct,
    then these loans are not participation loans and thus NOT
    'investments'.  If these appearances are correct, these loans would be
    in direct violation of federal laws governing who DCU may loan monies
    to (members or participatory lenders).
    
    If the above is correct, then who made these loans?  And how could they
    make these loans given the controls in place?

�    What these loans APPEAR TO BE are direct loans to a non-member of DCU. 
    
    A good point is brought up in .7.  Why designate yourself a trustee of
    some fund/whatever if you are taking the money out for yourself?

    
    >A good point is brought up in .7.  Why designate yourself a trustee of
    >some fund/whatever if you are taking the money out for yourself?

    The Trustee of the real estate trust is also liable for the mortgage,
    as well as the beneficiary of the trust.  The beneficiary of these
    trusts is essentially concealed through the use of trusts.  So another
    good question would be, "Who were the beneficiaries of this trust and
    were they DCU members?"  Again, since these appear to be direct loans,
    the issue of membership in the credit union is not a minor point. 
    Otherwise, DCU was acting as a bank and not a credit union.
    
    Too many questions.  Not enough answers.
    

The "I'm not a lawyer, but I play one on TV" light is once again blinking...

�    What these loans APPEAR TO BE are direct loans to a non-member of DCU. 

    >A good point is brought up in .7.  Why designate yourself a trustee of
    >some fund/whatever if you are taking the money out for yourself?

Well, yes, I agree that they appear to be direct loans.  On the other hand, it
is not unusual for a director of a corporation, or trustee for a trust, to incur
debt on behalf of the entity.  The Really Big Corporation of America can't 
sign the loan papers, it's president can.

>    The Trustee of the real estate trust is also liable for the mortgage,
>    as well as the beneficiary of the trust.  The beneficiary of these
>    trusts is essentially concealed through the use of trusts.

Under Mass law a trustee of a realty trust is personally responsible for any
obligations arising out of transactions made in relation to the business of 
the trust, except when the contract creating the obligation, which the
trustee signs for the trust, expressly states that the trustee will not be held
personally liable, or when the transaction concerns a negotiable instrument of
the trust.

I see no such disclaimer on the stuff Phil posted in .0, so Schulenberg was
probably on the hook for the dough if the loan fell through.  Yes, the
beneficiary can be concealed through the use of a real estate trusts.  And it
is probably a reasonable question to ask who was the beneficiary.  In my
understanding of the Barnstable fraud, part of the deal was the trust 
beneficiaries had fiduciary relationships with the trustees, which may not have
been proper.

But, methinks you miss the point.  Whether the trust was, in fact, legitimate
or not, it's my interpretation that it was the intention of the documents that
the trust was borrowing the money.  If that's the case, then despite the
composition and execution of the trust, it probably is within DCU's right to
loan money to the trust, placing the obligation on its books as an investment.

My point is that you should be questioning the reasonability of investing money
in real estate trusts in the first place, rather than searching for a 
technicality in the loaning of money to a non-member.  Since real estate trusts
are involved, proving that will be difficult.  Remember, too, that if they did
make a loan to a non-member, it would still be illegal for them to disclose 
information about that loan to you due to privacy legislation.

On the other hand, I think raising these issues, since they are in the public
record, and requesting DCU to provide answers is reasonable.  But don't expect
the current Board to understand anything about appearance.

./chris

    
    RE: .11
    
    DCU's BoD has told us they "invested" in participatory loans that were
    originated at Barnstable CU.  The amount of participation varying
    between 50-90%.  
    
    Now for Barnstable CU to originate those loans, they had to be to 
    individuals or whatever, that were within their field of membership.  In 
    other words, they couldn't originate loans to DCU members and DCU
    couldn't be originating loans to Barnstable members.  
    
    DCU's name on these mortgages APPEARS TO INDICATE that DCU originated 
    the loans.  The fact that a trust company name appears on them is 
    irrelevant IMO.  That is NOT what makes them participation loans.  What 
    is relevent is (1) the originating lender and (2) the trustees' and/or
    beneficiaries membership (or lack thereof) in the originating credit union.
    
    If these are indeed direct loans made by DCU to non-DCU members for 
    100% of the mortgage, then they are (1) NOT participation loans and (2)
    MAY BE illegal loans to non-DCU members.  If the case is (2), then who
    could have made these million dollar loans?
    

    Re .all
    
    The other key point to all this is that until just recently (June to be
    precise) DCU's statements of conditions did not show any large
    investments. Everything was wrapped up under LOANS TO MEMBERS. Take a
    look at the 1990 statements of condition. This in my view shows that
    these transactions were accounted for as LOANS not as INVESTMENTS. And
    as Phil points out if they were LOANS and the trust owner was not a DCU
    member then they were ILLEGAL.
    
    The difference between the "things" talked about here and the BCU
    participation loans is that the BCU loans were "just" being misclassified on
    the statement of conditions. If these trust loans were indeed LOANS
    then they were just plain ILLEGAL (and as it happens correctly
    classified). Now I'm concerned with the DCU BOD not having the correct
    checks and balances inb place to allow these illegal things to go on.
    This is my major issue (in addition to the terrible communication
    policy) with the current DCU BOD and thus why we the membership should
    vote them out.
    
    Dave

    Since the DCU loans money to the Federal Government (non members I
    think) and hides it by saying they are investing in government bonds
    and such, I guess we need to shut the whole place down.

    Re .14
    
    If you look at the statement of conditions you'll see that the Federal
    Funds money is not hidden. It is clearly called out as:
    
    FEDERAL FUNDS SOLD
    
    it is not hidden in any other line. I believe that you'll find that
    FEDERAL FUNDS SOLD is defined financially as an investment and not a
    loan. Therefore it is perfectly legal and proper for the DCU to do
    this. Now if it did this and hid this figure in LOANS TO MEMBERS like
    it did with the participation loans then I'd be complaining. So I don't
    understand your point exactly.
    
    Dave

    Before the DCU can grant a loan, it must verify that the recipient of
    the loan in fact qualifies.  Part of this qualification is membership
    in the DCU.  If the loan is to a trust, then either the trustee or a
    beneficiary would apparently have to be a DCU member.

    But HOW does the DCU verify whether a beneficiary is a member without
    the name of the beneficiary?  This name is not present on the morgage.
    Is it on other morgage documentation?  If not, it would seem that the
    DCU would be prevented from granting such loans for lack of ability to
    determine eligibility.

    When I refinanced my morgage through the DCU a few years ago I was
    considering putting my house into a trust.  I mentioned this to the
    loan officer and she almost went through the roof!  She made it clear
    that she could not write a morgage on a property in a trust.  I don't
    know the reasons or extent of this regulation - I had the impression it
    had to do with their ability to sell the morgage on the secondary
    market.

    Is it possible that ANY loan to a trust is illegal under DCU bylaws or
    regulations, either directly or through inability to satisfy some other
    regulation?
    

    
    RE: .14
    
>    Since the DCU loans money to the Federal Government (non members I
>    think) and hides it by saying they are investing in government bonds
>    and such, I guess we need to shut the whole place down.
    
    Would you like us to explain the difference between investing idle DCU
    cash in government securities (which some consider the lowest risk
    investments that exist and the most fluid) and "investing" in real estate 
    trusts in the form of mortgages for undeveloped Cape Cod real estate?
    And then there is the whole, if they were "investments", what kind were
    they question.  Would it trouble you to find out that DCU was investing
    in junk bonds and showing it in the annual report as "loans to
    members"?  
    

�If the loan is to a trust, then either the trustee or a
�    beneficiary would apparently have to be a DCU member.
    
    Is this true?

    re .17:  No thanks, Phil, I understand the difference.  One is a low
    risk, low return investment that DCU has most of it's money in.  The
    other is a high risk, high return investment that DCU has a small
    portion of their money in.
    
    If the question that started this topic is really an issue, I hope
    someone is seriously looking into it and doing more than spurring wild
    speculation in a notesfile.  The question that apparently needs to be
    answered is does the DCU/NCUA/whatever bylaws consider providing money
    to real estate trust to be an investement or is providing a trust with
    money a loan to a non-member.
    
    As far as converting an existing property to a trust (which was
    apparently denied by DCU according to a previous reply), this might be
    a different situation from the DCU investing in a real estate trust.

    Re .18:                  
    
> � If the loan is to a trust, then either the trustee or a
> � beneficiary would apparently have to be a DCU member.
>    
>   Is this true?
    
    Ignoring the "loan" vs "investment" issue (which is a central argument
    between the BoD and its detractors), any trust that receives a LOAN
    from DCU must have been established for the benefit of people who are
    within DCU's field of membership.
    
    I am the trustee for a trust of which the beneficiaries are my
    children.  The trust is treated as a family member (DCU has no
    extraordinary fiduciary responsibility, in keeping with its status as a
    credit union rather than a full-service bank) and maintains both RSVP
    and share draft accounts.

	The Declaration of Trust was recorded along with the Mortgage according
  to the Mortgage Documents you quoted, so you should be able to see it either
  before or after the Mortgage document.  If memory serves me correctly, you
  should record the Declaration of Trust BEFORE the Mortgage.  In either case
  you can look up the name in the 5-year index in the Registry.  Did you not
  see it?

		Danny

    
    Yes, Ed I am still out here.  Exactly what do you want to know? 
    Obviously I cannot divulge personal information of a DCU member so
    please phrase your questions with this in mind.
    

	The old Board had said that the former President of the DCU
	had not received loans that were out of the ordinary. Are
	you satisfied that they were telling the truth?

					Tom_K

    
    There is a VERY grey area here that I am afraid of stepping into since
    there are several lawsuits still pending involving many parties,
    including the former president of DCU, Mr. Mangone.  I realize this is a 
    dodge but I'm not sure I have any other choice.
    
    With the mess we inherited, it is sometimes impossible to determine 
    "the truth".  I'm sure there are things we will never be able to 
    determine with *any* certainty.  One trial is scheduled to start soon
    (May 10th) so some information may be on the public record soon.
    

    
    No thanks Ed.  I can read them just fine on-line.  I can answer your
    question with regards to the 1988 election.  Though the instructions on
    the ballot were incorrect (instructing members to choose 3 candidates
    instead of 2), it appears from the number of invalidated ballots that
    there were not large numbers of bad ballots.  I believe this issue was
    put to bed a long time ago.
    
    Again, I'd prefer not to comment on anything that has anything to do
    with Mangone.  The questions still remain valid.  Unfortunately the
    legal process moves very slowly.  I hope we are all here to discuss it
    when it finally does come to a conclusion.  Any guesses on the year? 8-)
    
    Why all this now Ed?  Mangone's upcoming trial??
    

    
    Ed, I must take exception with your statement that you and others
    "were lead down a path of discontent against the old BOD".  Your views
    and writings in this conference indicate you were already on this
    path of discontent well before the events of the fraud and everything 
    else that followed.  There was also much discontent on the path DCU was
    chosing.  So IMO there was already a traffic jam on this path of 
    discontent.  Some merely decided enough was enough and went to the front 
    of the line to lead it forward instead of going in circles.
    
    As for "covert operations that were done to find faults", just exactly
    what are you referring to?  Myself and others made many trips to
    courthouses, registries of deeds, newspapers, etc.  Basically we went
    anywhere we thought information might exist in a public forum.  All
    relevent information was reported in here.  Since no information was 
    forthcoming from DCU and the previous Board at the time, this was the
    only source of information available.  And in my opinion they proved to 
    be valuable resources.  Yes, in many people's eyes the previous Board's 
    lack of open and forthright communication was their downfall.  I don't 
    believe the questions being asked at the time were unjustified.  But 
    there appeared to be a belief that we were not worthy of the answers.
    
    >Promises were made, and not kept  "if not working for DEC.....",
    
    Please explain the above statement.  Have we promised something and
    reneged?  You seem to be going somewhere with all this Ed, so could you
    please cut to the chase?  I'll try and answer whatever questions you
    ask but there are still legal cases pending.

Ed:

I was heavily involved with searching the public record for
information about the participation loan fraud and other DCU
badness which took place during the old board's tenure.

Based on all the information I've received to date, it would
appear to me that Richard Mangone never had a low-interest 
or no-interest loan with DCU.  This is strictly my opinion
based on readings of various publically available court
documentation associated with the participation loan situation
and with DCU's activities pursuant to mitigating damages
against Mr. Mangone.

Note that I am not a Director, and I am not speaking for DCU
or for the Board of Directors.  I am wearing my "DCU member"
hat.  

Hope this helps a little....

./chris

I'll attempt to stay on the appropriate side of the line of confidential
information...

I believe you are refering to the issue of one of
Mangone's personal DCU monthly statements being published in the public
domain as a result of litigation (Mangone used it as a defense).
The statement showed that Mangone made what appeared to be an "interest
only" payment on a sizeable loan. If you took that payment and assumed
that the payment was for the interest only, it would appear that the rate
was much lower than appropriate.

Last fall, I looked at the raw data I deemed appropriate and to the best of my
ability I have satisfied myself that the appearance was deceiving and
the actual rate Mangone was charged was an appropriate rate. The payment was a
partial payment for that month. The information printed on the statement
was not complete enough to really understand what happened.