Monday, April 17, 2017

FDIC Insurance, or not, on Mutual of Omaha HOA Bank Deposits

The exchanges below were with the General Counsel for Mutual of Omaha Bank.
Unfortunately in subsequent conversations with the FDIC, they seem reluctant at this stage to get into specifics. When asked how/when we would know if the FDIC insurance applies to deposits via HOA Management Companies, they said - "when a claim is made" - in other words when the horse has bolted.
It would have been very easy for Mutual of Omaha to have honored the subpoena to testify at the OAH Hearing on bank records and explain all this. But strangely they let Carpenter Hazlewood, who were not representing them, object. During the course of that proceeding, Carpenter Hazlewood intentionally misrepresented certain facts to the Judge. In the absence of any response from them, we are simply left with the conclusion Carpenter Hazlewood lied. For details click HERE

My conclusion
The only way you can be sure the FDIC insurance flows through is to ensure the bank has the Association's Tax EIN in its records and at least one Board member is an account signatory
Trumps recent Executive Order this week suggests a totally different attitude taking shape with this administration on bank failures. This will manifest itself later in the year as the transition takes effect.

Letter to Gene Twellman, Chief Counsel for Mutual of Omaha Bank

After our phone conversation Friday about your LETTER, I did consult the FDIC videos which are pretty basic. They get nowhere near the specific response the FDIC gave us in response to a specific HOIA related inquiry.
We have different views on whether the FDIC coverage applies to deposits held with you. As your bank has $5billion of HOA deposits, that is hardly inconsequential. As little of that is actually lent back to HOAs, but into largely property loans, you are what I consider to be an FDIC insured investment trust.
We also have different versions of the facts which are:
  1. None of your account documentation identifies the fiduciary relationship between the Mgmt Co and the depositor, as required by the FDIC, even when the account opening document does provide for that. See ATTACHED
  2. At no point have we ever been supplied with account documentation that shows any linkage between and HOA’s EIN # and a deposit with you. See same package.
  3. Furthermore Ms. Ryan’s letter ATTACHED also had a number of glaring items such as
    1. She does not appear to know the true legal status of the HOA be it a Condominium or Planned Community.
    2. So what SIC code applies…that for an HOA, Condominium or …a Management Company?
In the absence of any further proof, I conclude still your accounts do not meet the FDIC requirements
However what we think is academic. It’s what the FDIC thinks. To that end I’ve copied the FDIC with a view to setting up a conference call to discuss. Of course they don’t deal with the Patriot Act issues but let’s take one issue at a time
I presume you are acting in good faith as we are. I therefore assume you are not setting the stage for a defamation suit which is protected by the truth and Arizona’s anti-SLAPP statute anyway. I also will respect any individual, except a government official, who requests to be taken off our emailing list. I also would like to be proved wrong on this. Except Wells Fargo thought it had procedures but they were not being implemented.
Finally you mentioned the fact that all First National Bank of Arizona deposits were paid out in 2008 pursuant to the FDIC’s $862mm contribution. That’s true but that raises further questions:
  1. I have never seen uninsured depositors paid out – Why were they treated that way with First National Bank of Arizona?
  2. We have a new Sheriff in town in Washington. I personally doubt Too Big To Fail will survive two Trump terms. So my question is - are you assuming it’s business as usual in Washington and they would play by the old rules in future bank failures?
  3. If I am correct - of what value are your assurances? 
Calvin Troup
Senior Consumer Affairs Specialist
Federal Deposit Insurance Corporation
AHF Blog

John Sellers
6231 East Mark Way, Unit 12
Cave Creek

Arizona 85331