U.S. District Court entered summary judgment this week of more than $1 million against Stanley McDuffie, the alleged "brains" behind St. Thomas-based Her Majesty’s Credit Union, and against the company, over charges of defrauding clients, conspiracy and racketeering.
Her Majesty’s Credit Union was created by McDuffie, as Stanley Roberson before he changed his name, and HMCU comptroller John Williams. It served as the territorial counterpart of their Colorado-based company Jilapuhn Inc., according to court documents filed by the Securities Exchange Commission.
The credit union has an office in Denver, and its creators reside in Aurora, Colo. The company first came under scrutiny by Colorado state regulators, who issued subpoenas seeking information in 2010.
The company refused to comply and the officers refused to appear in court. As a result, a Colorado judge sentenced McDuffie to two concurrent six-month sentences in prison for contempt of court.
The SEC subsequently took up the case, followed by the V.I. Department of Justice.
Despite calling itself a credit union, the SEC says HMCU has never been chartered as a credit union by Colorado, by any other state or by the National Credit Union Administration, the federal regulator of federally chartered credit unions. Her Majesty’s Credit Union is not insured by the National Credit Union Share Insurance Fund, a U.S. government-backed fund used to protect deposits of credit union members.
While HMCU has said its investor funds are insured up to $100,000 by Lloyd’s of London, the SEC and Lloyd’s of London say that is not true.
In a Sept. 15 order, Judge John Kane found the charges essentially undisputed, with no factual rebuttal of any of the main allegations.
Because "no genuine issue exists as to any material fact, summary judgment in favor of the SEC is appropriate as a matter of law in all respects" Kane wrote.
"Where a fact is ‘disputed,’ it is because defendants deny it," Kane continued. “Because these disputed facts either directly contravene other facts that defendants elsewhere admit or are denied without explanation and supported by record evidence, I find that no dispute of fact is ‘genuine.’”
The court found McDuffie and HMCU lied to investors about where the funds were kept; how they were invested, if they were insured and other material matters. It determined HMCU was not legally a credit union at all, and that the CDs it sold amounted to securities.
It enjoined McDuffie and HMCU from ever working in the industry again, saying "his violations were not isolated given that he had previously operated a failed credit union in the U.S. and subsequently moved to the Virgin Islands to continue his illegitimate credit union operations.”
“McDuffie has given no acknowledgement of his wrongful conduct and there is no reason to conclude that he will not have opportunities to commit violations in the future," the judgment states.
The court directed McDuffie and HMCU to pay back $533,000 it defrauded from customers, plus interest of $51,000, plus another $533,000 in punitive fines, for $1.1 million in total judgment.