Credit union takes its ex-president to court

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It’s been more than a year since Richard Lange has been president of First Community Credit Union (FCCU), formerly Columbia Heights Community Credit Union, a job he held for more than 25 years. The circumstances of their parting appear to be open to interpretation.

According to documents filed in a Hennepin County District Court civil lawsuit:
• FCCU says Lange took more than $130,000 that didn’t belong to him; Lange says the transactions FCCU is questioning are legitimate commission payments he earned when he helped First Fleet Sales, which operated at FCCU, sell cars to FCCU members.
• Lange says FCCU offered him a deferred compensation plan that would have paid him more than $500,000 when he turned 59, but revoked the plan after the first premium payment; FCCU says the whole thing was Lange’s idea and he proceeded without proper FCCU approval.
• Lange says FCCU is holding $22,000 that belongs to him, along with the contents of his safe deposit box; FCCU says it’s waiting for an audit to determine to whom the money and materials belong.
• Lange says FCCU is making false statements that keep him from getting a job at another credit union; FCCU denies that.
• FCCU says it paid Lange for any vacation he earned; Lange says FCCU owes him for six more weeks.
• FCCU is suing Lange for money it says he took improperly; Lange is counter-suing FCCU, saying that FCCU owes him money and has wronged him.

The Northeaster tried to reach Lange, who does not appear to have a published telephone number. A letter requesting an interview was delivered to Lange’s address (the address was found in court documents). The Northeaster left calls for Lange’s attorney, Thomas Wieser, at his residence and his office. The calls were not returned. Statements attributed to Lange come from court documents his attorney filed.

The insurance payment
FCCU has posted a letter in its lobby dated Dec. 27, 2005, from the Gregerson, Rosow, Johnson and Nilan Ltd. Law firm, attorneys representing CUNA Mutual Group (which insures the credit union). It is signed by David H. Gregerson and addressed to the attorneys representing First Community Credit Union, Jonathan Bye and Nancy Vollertsen, of Lindquist and Vennum.

The letter indicates that the insurance company paid FCCU $124,363.30; it is listed as Claim # B0715657, FCCU vs. Richard Lange. The letter concludes with the sentence, “CUNA Mutual group asks that the enclosed payment be applied to specific losses set forth above.”

It details 10 transactions that total the reimbursement amount; most are transfers from the First Fleet sales account into Lange’s personal Visa account, from 1999 through 2004. Three transfers show payments to Janet Lange’s personal Visa account.

The amounts include: a deposit, in 1999, of a $250 money order payable to FCCU into Richard Lange’s account; in 2000, a deposit of a $200 check payable to FCCU; in 2001, a deposit of an $11,000 money order payable to FCCU into Richard Lange’s account; in 2001, a deposit of a check and a money order totaling $19,569.30 from First Fleet Sales into Richard Lange’s account; in 2001, the transfer of $14,000 from the First Fleet account into Richard Lange’s Visa account; in 2002, a $600 transfer from the First Fleet account into Richard Lange’s account; in 2002, a $1,000 check payable to First Fleet Sales deposited into Richard Lange’s account; in 2002, a $28,000 transfer from the First Fleet account into Richard and Janet Lange’s Visa accounts; in 2003, a $34,389 transfer from First Fleet into Richard Lange’s Visa account; in 2004, a $17,855 transfer from the First Fleet account into Richard and Janet Lange’s Visa account.

The letter refers to FCCU’s “remaining claims asserted for coverage,” but says that further evaluation is needed before CUNA will pay.

The court file
According to documents in Hennepin County District Court, Lange was president of FCCU from Aug. 7, 1978 to Dec. 15, 2004. FCCU says that Lange deposited more than $131,000 of FCCU money into his own account, and paid personal credit charges and other expenses with FCCU money. They say he also used FCCU’s credit card for personal expenses. FCCU alleges fraud, breach of fiduciary duty, unjust enrichment, and civil liability for theft.

According to Lange’s answer and counterclaim, dated Sept. 23, 2005, the credit union did well under his leadership, adding three new offices, increasing the number of employees from four to 30, increasing assets from $1 million to $53 million, and memberships from 600 to 8,000. He states that he received regular pay increases and was not disciplined, warned or criticized by the board in the time he was employed, and that FCCU received the highest examination ratings from the State of Minnesota.
Starting in 2000 (according to Lange’s answer and counterclaim), Lange assisted another credit union employee with sales or leases on cars through First Fleet Sales, and was paid a commission.

In 2004, according to Lange, the FCCU board offered Lange a deferred compensation plan; it included a lump sum of $550,000 payable to Lange when he turned 59. Lang says FCCU made the first premium payment in August 2004, to New York Life Insurance Company, but revoked the premium payment the following month.

FCCU says Lange initiated the deferred compensation plan, and the board provisionally approved it, requiring that the board chair sign off on the final plan. FCCU says the chair never approved it; however, the premium was paid with FCCU money anyway. When the board learned of it, FCCU says, it revoked the premium and canceled the plan.

Lange claims that when, in October, 2004, FCCU investigated payments made to him from First Fleet, “on information and belief, the investigation found that the only sums paid to Lange or on his behalf for services relating to First Fleet were the commissions.”

FCCU disputed that interpretation. Lange, they say, never told the FCCU board that he was compensating himself through First Fleet. They say Lange did not record the commissions he took in FCCU’s financial records. They say he took commissions that were owed to FCCU from NFP Mortgage Company, “as well as various other funds of First Community.”

Lange said FCCU made false statements to Credit Union Mutual Insurance Society about his right to earn car sales and lease commissions. Because the Credit Union Mutual Insurance Society has refused to bond him and provide insurance coverage, he claims he can no longer work at a credit union. And, Lange said, because FCCU made and continues to make “false statements” designed to prevent him from working for another credit union, he is losing out on approximately $100,000 a year in salary.

FCCU denies making false statements and obstructing Lange’s future employment opportunities.

Lange is seeking, among other things, the $550,000 deferred compensation benefit, past lost income, compensation for loss of future earnings, vacation pay, return of money in his account, the contents of his safe deposit box, and attorney fees, costs and interest.

The board
Columbia Heights business owner Bruce Magnuson has been a FCCU Board of Directors member for seven years, and board chair for five. The other six members are Jo-Anne Student, Rob Hartley, Kelly Gourley, Rick Ashbach, Joanne Cirks and Al Stahlberg.

Magnuson said in addition to the civil lawsuit, he is also aware of an ongoing FBI investigation into the matter.

When asked if FCCU can do anything to avoid such disputes in the future, he said, “We continue to do audits and we are reviewed by the state.”

The deferred compensation mentioned in the lawsuit was a “457F plan,” a supplemental executive retirement plan, available only to employees in nonprofit organizations. Magnuson said it is similar to a whole life insurance policy, worth a cash value after a certain amount of time. “It is used as an incentive [to a credit union officer] not to retire early,” Magnuson said.
When asked if any other FCCU employees are involved in the dispute, he said they were not.

FCCU’s attorney Jonathan Bye said he and his clients prefer not to comment on the case, other than to say that they stand by the allegations in the lawsuit. “We believe that the court is the appropriate place to decide the outcome.” When asked if the parties have gone through mediation, as the court suggested, he said they have not. “I assume we will. We haven’t discussed it recently.”

Court documents indicate that on April 20, Lange and FCCU agreed to delay the trial schedule by four months. The mediation is now scheduled to be completed Sept. 15, and the trial, if needed, is set for Nov. 20.

Editor’s note: Gail Olson, Kerry Ashmore, other Northeaster employees, and Pro Media, Inc., the company that publishes the Northeaster, have accounts at First Community Credit Union.

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