Rush Credit Union: uncovering a series of irregularities

The beginning of the end for Rush Credit Union came on October 22nd, 2010, when the Central Bank informed it that it had been included in a programme of limited inspections that was being undertaken in the sector.

Grant Thornton was appointed and the inspection found a shortfall in the provision for bad and doubtful debts of €540,000. Instances of non-compliance with the lending restriction imposed by the regulator in July 2009 were also identified.

Rush’s external auditor, FMB Chartered Accountants, was instructed to undertake a full review of the credit union, which identified additional provisions of €650,000 at May 31st, 2011.

On February 6th, 2012, Rush and the regulator met to discuss a number of issues that had arisen in an asset review by Grant Thornton around the valuation of its premises, governance, liquidity and its future viability.

Rush reported a deficit of €590,000 and a reserve position of 7.9 per cent, below the Central Bank’s minimum level of 10 per cent.

Rush then engaged Grant Thornton to carry out a review of its investments and loan book, and O’Donovan Associates Management Consultants to review its governance.

Documentation and signatures

Grant Thornton’s report in June 2012 found an additional provision of €1.2 million could be required. Issues around loan documentation and signatures were also identified.

In 2013, Rush provided the regulator with documentation of possible support of €750,000 from the Irish League of Credit Unions (ILCU). This guarantee was put in place for two years and was to be used to restore Rush’s reserve position. It was never drawn down.

On June 5th that year, Rush held what would turn out to be its final agm for shareholders. No dividend was recommended. In fact, the final dividend to shareholders was paid in 2008.

In 2014, Rush informed the regulator that eight customer accounts had been written off to the value of €140,606.

In January of the following year, Rush reported reserves of 8.14 per cent in its prudential return. On March 27th, the registrar told Rush that she was “minded” to issue a direction for it to repay member savings in excess of €100,000, the limit of the deposit guarantee scheme.

On April 16th, 2015, Rush told the regulator that its board had decided to draw down the ILCU’s guarantee, to bring its reserves up to requirements. Two days later, ILCU’s guarantee expired with Rush failing to draw down any funding.

Grant Thornton flagged an issue with the valuation of the credit union’s offices in Rush and Lusk. Having been valued at €2.2 million, they were eventually written down to €900,000.

In September 2015, Rush's board decided to pursue a transfer of engagement to the neighbouring Progressive Credit Union, a plan eventually abandoned in October of this year.

ILCU lodged €1.28 million in an National Treasury Management Agency account in November 2015, in guarantee funding for Rush, conditional on the completion of its transfer to Progressive. These funds were never accessed.

Forensic review

On February 26th of this year, matters escalated when auditors FMB notified the Central Bank of a suspected misappropriation of members’ funds in Rush. Grant Thornton was hired to conduct a forensic review, with Arthur Cox appointed as an independent legal adviser to the board of Rush.

Grant Thornton found additional instances of suspected misappropriation of funds and, in March, the Central Bank notified the Garda of suspected breaches of the Companies Act.

On May 27th, Rush notified the regulator of a negative reserve of €662,609, the first instance of balance sheet insolvency.

In July, Rush submitted a report on its car draw and suggested redress of €9,000 to members. In its review, Grant Thornton was not able to locate details on winners of the draw. Rush would later repay €450,000 to members in redress for the car draw.

Grant Thornton also identified a potential tax liability relating to payments made to two contractors. This was reported to the Revenue by the Central Bank in August, along with a report to Garda about potential money-laundering.

A forensic review identified unauthorised transactions over a five-year period. No figure has been put on this but it is understood that more than €1 million was taken out of members’ accounts.

The Central Bank ran out of patience in October 2016. By that stage, Rush had a hole of €4.7 million in its reserves while its liabilities exceeded its assets by €2 million.

On November 2nd, the regulator made an application to the High Court to have McStay Luby appointed as provisional liquidators. This request was granted, with their appointment confirmed yesterday.