Red flags raised at Rush Credit Union as far back as 2010

Rush is a sleepy coastal village in north county Dublin that rarely garners national headlines. Yesterday, it found itself at the centre of the latest scandal to hit the domestic financial sector involving alleged money laundering, rigged car draws, and the misappropriation of funds at its local credit union.

It resulted in the Central Bank of Ireland making an ex parte application (only one side represented) to the High Court to have provisional liquidators appointed to Rush Credit Union (RCU), which is technically insolvent with a €4.7 million hole in its reserves.

Such are the sensitivities involved at this stage that only certain parts of the regulator’s affidavits were published. A full hearing has been pencilled in for November 21st, when we shall learn more details.

The court was told that criminal prosecutions may be brought out of investigations into the running of RCU, which also had an office in neighbouring Lusk.

RCU was established in 1972 and has about 11,457 members, with savings worth €24 million.

Red flags were raised about the credit union as far back as 2010. An affidavit from Patrick Casey, the Central Bank's head of resolution for credit institutions, outlined serious deficiencies that were found at RCU in relation to the control of cash, lending practices, and the day-to-day running of the credit union.

The court was told that RCU had not held an annual general meeting since 2013, and had not published any financial statements for the past three years.

No permission

The reason for this is that it didn’t have the permission of the Registry of Credit Unions at the Central Bank, which effectively signs off on the annual accounts. In the absence of this approval, the accounts cannot be sent to members and by extension an annual general meeting cannot be held. This was all done to avoid a run on deposits.

This raises questions as to why the Central Bank waited three years to finally pull the plug on RCU. It is understood that there was intensive engagement between the regulator and RCU over this period and the Central Bank would no doubt have wanted to avoid a liquidation if possible.

However, it had moved on other errant credit unions in the past three years. Beerhaven collapsed in 2014 with €11 million paid out to depositors via the deposit guarantee scheme, and Newbridge was merged with State-controlled Permanent TSB bank in late 2013 at a cost of up to €54 million.

The good news, if it can be described as such, is that RCU depositors will be made good from the guarantee scheme, which is managed by the Central Bank and has a pot of €179 million to draw from. RCU members can expect their cheques within 21 days.

A less certain future awaits staff members, who might end up with nothing more than statutory redundancy payments. The provisional liquidators from McStay Luby were expected to meet them today.

Lots of questions remain about this sorry affair. We might begin to get some detailed answers when the matter returns to the High Court later this month.