St. Thomas-based Her Majesty’s Credit Union, facing a U.S. Securities and Exchange Commission fraud investigation, has closed its doors and court documents say at least one investor has been unable to get the company to pay on a certificate of deposit.
No charges have been filed, but V.I. Attorney General Vincent Frazer said there is an active investigation going.
Asked Monday afternoon how many Virgin Islanders may have invested and how much money might be at stake, Frazer said, "These are the questions we are investigating." He declined to elaborate further, saying the Justice Department could not comment because of the ongoing investigation.
Her Majesty’s Credit Union was created by Stanley Roberson and John W. Williams in 2008 as the V.I. face of their Colorado company, Jilapuhn Inc., according to court documents filed by the SEC in March.
The state of Colorado and more recently the SEC have been trying to get Williams and Roberson (who is also known as Stanley McDuffie and as Stanley Battle, according to the SEC) to respond to subpoenas seeking information about the company’s finances.
Stanley/McDuffie/Battle and Williams have thus far refused to comply and currently, the SEC’s Denver Regional Office is seeking to have a federal judge compel their appearance and compliance, or face contempt charges.
The credit union has an office in Denver, and its creators reside in Aurora, Co. The company first came under scrutiny by Colorado state regulators, who issued subpoenas seeking similar information in 2010.
The company refused to comply and the officers refused to appear in court. As a result, a Colorado judge sentence Roberson to two concurrent six-month sentences in prison for contempt of court.
The credit union then produced more documents, but SEC attorney Danielle Voorhees said in an affidavit to the court that “such documents appear to fail to fully respond" because they lack information on "how HMCU used or invested the monies it received from investors who purchased HMCU’s CDs."
Despite calling itself a credit union, the SEC says HMCU has never been chartered as a credit union by Colorado, any other state or the National Credit Union Administration (“NCUA”), the federal regulator of federally chartered credit unions. HMCU 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.
As a result of Roberson/McDuffie/Battle’s conviction for contempt of court, the NCUA issued an order in April of 2011 prohibiting him from participating in the affairs of any federally insured financial institution.
But NCUA does not have authority to regulate or examine HMCU because HMCU is not advertising itself as a federally insured credit union and HMCU makes no references to NCUA on its website, according to Voorhees and the SEC.
While HMCU has said its investor funds are insured up to $100,000 by Lloyd’s of London, "on two occasions, Lloyd’s of London, or its affiliates wrote to HMCU to demand that HMCU cease its unauthorized use of Lloyd’s name and the false and misleading statements regarding insurance issued by Lloyd’s of London," Voorhees said.
The SEC subsequently took up the case, and has also been met with a blanket refusal to comply with subpoenas. In February, several days after the deadline for responding to subpoenas, Roberson sent a letter asking for a 60 day extension to allow the company to locate an attorney.
The SEC sent an email pointing out that HMCU had already had three weeks to find an attorney, as well as granting an additional week. Roberson emailed back with some previously released documents and told the SEC “(w)e will continue to search for counsel and will not appear in your office until counsel is retained."
At least one Florida resident has been trying, unsuccessfully, to get his money back from HMCU, according to the SEC. That person, who is not named, purportedly purchased two CDs worth a total of $150,000 in 2008. But it stopped paying interest in 2011 and subsequently has failed to repay the investor’s principal of $50,000 when the purported CD matured in December 2011.
According to the SEC, Roberson/McDuffie/Battle called the investor in January, saying he would receive the money once HMCU resolved a pending lawsuit against Bank of America.
The SEC looked at that lawsuit and Voorhees suggested it seemed to lack merit. HMCU had filed suit against Bank of America seeking $875,000, saying it had deposited two checks totaling that amount, but Bank of America was refusing to credit its account for the amount.
Both checks were tax refunds, and Bank of America provided the court with a copy of a letter from the U.S. Internal Revenue Service "in which the IRS requested (Bank of America) return the two checks since the checks represented tax refunds that the IRS should not have issued," Voorhees said.
In the affidavit, Voorhees said the SEC does not know why checks from one group of investors would be used to pay off another investor’s CDs, "as McDuffie represented to an investor during a telephone conversation on Jan. 24, 2012."
Calls to HMCU headquarters’ main number early Monday afternoon for comment and response were answered by voicemail and no one returned calls by 9:30 p.m. Monday.