Conference 7.286::dcu

Erv sent me the above question in the mail and I suggested he post the
question in the notes file.

Good question. I didn't have a lot of room to fully explain what I meant.

My answer is that we should look into whether it's cost effective. Mangone
& others but primarily Mangone is being sued by NCUA for $48M. There exists
a grand jury looking into criminal charges in connection with the fraud.
I have my doubts about whether DCU will really financially benefit from
the lawsuit against Mangone - it might be just an expensive finger pointing
exercise. In other words, if it costs an outrageous amount in lawyer fees to
go after this suit, and DCU would get paid off after the other two suits,
is it really worth pursuing? I don't know because I don't have the facts, but
I feel it's reasonable to look into it.

Note that I *absolutely* do not favor letting Mangone off the hook.
But I feel that it's possible he's on the hook for lots
more than we can put him on the hook for. If we stand to gain no money and
Mangone is going to rot in jail or go bankrupt, why bother pouring all that
lawyer money into something for which there's no financial return?

Some Historical Background:
===========================
The following is my accounting of the legal work in progress with regard to
Richard Mangone and DCU.  I hope that if I have misstated anything herein,
that DCU will correct this information here in notes.

My understanding is that Mangone is involved in at least 2, and potentially 3, 
legal actions where he is named as a primary or co-defendant, and at least one
legal action where he is named as the complainant.  Specifically, the actions
I'm aware of are:
		  NCUA v. Cohen, Harris, Mangone, O'Neil, and Smith        
                  DCU v. Mangone

Mangone has also filed a brief in federal district court requesting a ruling
or evidentiary hearing on the issue of whether certain ERISA pension plan 
assets were wrongfully seized by DCU in their action against Mangone.
My understanding is that DCU also received an asset inquiry in November 1990
in conjunction with another case to which Mangone may have been/is a party. 

The suits that have been filed all allege fraud in various forms and are 
actions requesting money damages, treble damages, and attornies fees from
the defendants.  The brief by Mangone in federal court is a highly technical
legal analysis of the authority of a lesser state court to seize assets of
an individual when said assets are held by right of a federally legislated
program.  To avoid rat-holing, it is a document hoping to overturn the 
seizure of Mangone's ERISA assets by DCU and force DCU to return them.  

Given that I'm not an attorney, my opinion is not based on expertise, but 
my current belief is that there is a strong chance the federal court may 
intervene and provide relief on behalf of Mangone.  The legal analysis is 
quite compelling and the precedents and legal decisions cited are quite
clear.


My Opinion as a BoD Petition Candidate:
=======================================

This information is based on my reading of the aforementioned cases as of
3 months ago.  Both cases are being motioned heavily (meaning that attornies
for both sides are filing numerous motions on the propriety of various
dimensions of the case), and my understanding is that several hearings have
already been held in both cases.  Further, I believe that the NCUA case is
docketed for hearing in 1992, perhaps as early as May (the notation I saw
was not clear to this non-lawyer, but that's how I read it). Also, if
my facts are correct,  DCU v Mangone is on a lower-priority trial track and 
may not be heard until 1994.

I believe that DCU should make its best efforts, within its financial means,
to recover actual and punitive damages from Mr. Mangone.  Further, I believe
that DCU should do everything in its power to encourage and aid any state or
federal criminal investigations.  On the other hand, I think DCU needs to
look realistically at their chances of recovery before dumping potentially
millions of dollars into legal fees.

A sad but perhaps true fact is that most of the defendants in this case will
have no real assets to fork over in damages.  My understanding is that some
defendants in the NCUA case are now in bankruptcy proceeding, or have a least
filed for protection from creditors.  Further, I understand that Mr. Mangone
may have already had to sell of some assets to cover his own legal bill. Another
issue is where DCU is in the line to collect damages.  If NCUA prevails against
Mangone, and he winds up turning over the lion's share of his assets to the
federal government, there may be very little left for DCU to take.  On the 
other hand, if DCU is first in line, there may be substantially more.

DCU needs to look hard at the costs of litigation verses the value of recovery.
If DCU prevails, at a cost of several million dollars, and winds up collecting
$5.00 a week from Mangone, it will have done a disservice to its membership.
On the other hand, if there is money to be obtained, then DCU should vigorously
pursue its claims.

I am not privy to most of the Board discussions regarding the case(s).  The
Board meeting minutes I've obtained have all discussions of the Mangone case
redacted under the heading "Attorney/Client Privilige" (this despite the fact
that I believe the membership is the "client" in this process and has the right
to view at least part of this information).  I do not know how much DCU has 
spent, or what they have learned/are being told about their chances for recovery.
Whether there is a realistic chance to collect, or whether the suits were filed
in some vain effort to close the barn door after the horse has departed remains
to be seen.  This is something I intend to find out.

/Chris

	RE:.2
  My wife's an attorney, so consequently I get to read a lot of motions and
  cases.  While such motions sound really compelling at first, you get to
  realize that in fact motions and arguments are made only to support their
  side of the case.  Attorneys have a habit of only quoting cases that bolster
  their side.  If you read the cases it turns out that the other side has 
  things in its favor from the very same case.

	The Attorney/Client Privilege quoted from the Board meeting minutes
  are indeed necessary, since otherwise the other side can find out what they
  are thinking and doing about the case.  There are a number of things that
  a Board of Directors need to discuss which should never appear in meeting
  minutes.

		Danny

re: .3

Is this a correct interpretation of what you are saying?  You are saying that
just because the brief filed by Mangone's attorney presents a good case for
not allowing the seizure of his accounts, that it doesn't necessarilly mean
that there isn't other case law more favorable to the opposite view.  As such,
we shouldn't try to determine how a judge might rule in the case.

O.K.  The next question is, does anyone know if the accounts that Mangone is
trying to prevent from being seized, are of such value that DCU could expect
to recover anything if their suit is successful?  If not, then as others have
stated, it doesn't really matter how the suit is resolved.

Bob

Re: .4
I believe I heard the following, tho it could easily be wrong...

The funds that Mangone has in DCU (on the order of $200K) are in a retirement
fund and as such are subject to different laws than if Mangone had a personal
account there. DCU may not be able to keep control over them because of some
federal rule. I guess the idea is the funds are not completely "owned" by
Mangone because he can't use them until after he retires.

    
    re .3 and .4 (ainsley)
    
      Yup - I believe you correctly summarized .3's comments correctly.
    
      To further expand,  a legal brief typically follows the 
    following format (signified by the mneumonic IRAC)
    
      Issues:        What specifically does the case deal with
    
      Rules of law:  What laws (Either "legislature law" or "Case law"
    			from similar cases in the past should be used
    			in deciding the current case.
    
      Applicability:  Here the lawyer attempts to "Distinguish"  his 
    			case - I.E.  Convince the judge that this
    			particular matter is most clearly and correctly
    			dealt with by the legal theory he has presented,
    			and to show why the opponent's  "IRAC" should
    			should not apply to a particular case.
     
    Conclusion:    Summary which lists specifically what the desired 
    			ruling should be. (And sometimes why)

Aren't we (DCU) third or fourth in line to collect money from Mangone with
those ahead of us suing for millions?  If so, $200K is peanuts and we will
never see any of it unless we can somehow get ahead on the list of who gets
what and when.

Bob

    
    The issue with Mangones's money that DCU seized has to do with not only
    its origin (retirement funds) but the way in which DCU issued a check,
    deposited it in Mangone's account ("as is customary", instead of sending
    it to him) and then transferred the amount to account 999999999 (not
    exact).  Coincidentally on the exact same day DCU filed suit against
    him.  
    
    Now if DCU could seize the funds this way, why were they not included
    in the statement of Mangone's available funds when Mangone was named in
    another law suit?
    
    All very interesting manuevers and questions of law that I am sure will
    pay many lawyer's mortgages.  8-(
    

   RE:.4  I made a slight error in .3 :

>  side of the case.  Attorneys have a habit of only quoting cases that bolster
>  their side.

   This should read:

�  side of the case.  Attorneys have a habit of only quoting those sections of
�                                                            ^^^^^^^^^^^^^^^^^
�  cases that bolster their side.

  I remember one case that my wife was involved with, that if you believed the
  quote of a case in the motion made by the other side, the other side should
  have one.  When you read the actual case however you find out that the ruling
  was in the other direction.

  RE:.4.  Your interpretation is correct.

  RE:.5.  If the funds are in a retirement account then yes they may be subject
  to other laws, but if its his retirement account he owns the money in it and
  he does control the money and not the DCU or anyone else.  In fact there is
  nothing preventing him transferring the money to another bank, or other fund.
  I also believe that he can withdraw money from the fund (substantial penalty
  for early withdrawal).

  RE:.6  That's pretty good.  Maybe you should be teaching law!

  RE:.8

>    Now if DCU could seize the funds this way, why were they not included
>    in the statement of Mangone's available funds when Mangone was named in
>    another law suit?

	Good question.

			Danny