Investigator: Credit Union President Made Quick $44,500 Profit Off Loan
PROVIDENCE, R.I. (AP) _ The president of one of Rhode Island’s largest credit unions made a quick $44,500 profit in a land deal that started with an illegal loan, investigators testified Monday before a panel investigating the state’s banking collapse.
John R. Lanfredi, president of the Rhode Island Central Credit Union, borrowed $525,000 from the Marquette Credit Union, where Lanfredi served on the board of directors, Lucien Gousie, former senior vice president of lending at Marquette, testified before the RISDIC investigatory commission.
The 1987 loan actually was granted to JMS Development Corp., a corporation formed in January 1988 which lists John Lanfredi, his wife, Muriel, and their son, Steven, as its only members, Gousie said.
The loan financed 100 percent of JMS’ purchase of seven raw lots in Cranston, six of which the corporation resold within seven weeks at a $44,500 profit, RISDIC commission investigator Howard Rosenstein testified.
The loan to JMS, arranged by Marquette’s president, Charles Paquin, a longtime friend of Lanfredi, twice violated Rhode Island law, Rosenstein said.
Banking laws prohibit credit unions from loaning money to directors under terms not available to the general public, yet Marquette waived the standard 1 percent origination fee and gained approval from the lending committee via telephone, Gousie said.
″It was extremely unusual,″ he said. ″Mr. Lanfredi was a director. It should have been presented to the full board.″
Additionally, the law requires banks to report loans to directors to the Department of Business Regulation, but investigators ″can find no record of this loan ever being reported,″ Rosenstein said.
The buyers of the JMS lots, Profile Construction, which bought two, and Ronald Longtin, who bought four, received 100 percent financing from the Heritage Loan and Investment Co., and Columbian Credit Union, respectively, Rosenstein said.
Longtin, a former employee of Cranston Associates Brokers, took the Fifth Amendment and refused to answer the RISDIC commission’s questions when called to testify.
A principal in Cranston Associates, Thomas J. D’Andrea, was charged Feb. 27 with forgery, conspiracy and aiding in fraud for allegedly using front men to get loans when he could no longer borrow from Rhode Island Central.
Lanfredi was charged with conspiracy and aiding D’Andrea.
The Marquette, Rhode Island Central and Columbian credit unions, along with 42 other institutions, were closed Jan. 1, 1991, when their private deposit insurer, the Rhode Island Share and Deposit Indemnity Corp., or RISDIC, collapsed. Marquette and Rhode Island Central, the largest and second largest of those closed, have been given no chance of reopening with federal insurance and are headed for liquidation by the state’s bailout agency, DEPCO.
Most other institutions have re-opened or are expected to re-open.
The RISDIC commission last week began a third round of public hearings into RISDIC’s downfall. The panel is focusing on the abusive lending practices of the largest credit unions.
The system allowed 10 borrower groups to borrow $174 million from a handful of credit unions. Investigators say borrowers’ inability to pay the loans cost the banks their solvency and contributed to RISDIC’s collapse.