Rush Credit Union was placed into provisional liquidation yesterday following an application by the Central Bank of Ireland amid allegations of money-laundering, the misappropriation of funds and and other financial improprieties.

The President of the High Court, Mr Justice Peter Kelly, approved the appointment of Jim Luby and Tom Rogers of McStay Luby as provisional liquidators following an application by the regulator.

The court was told that criminal prosecutions may be brought arising out of investigations into RCU with gardaí notified of suspected money-laundering.

It heard that RCU had net liabilities of €2 million and had a €4.73 million hole in its reserves. Credit unions are required by the regulator to have at least 10 per cent reserves of total assets but RCU’s figure was minus 8.7 per cent.

RCU was established in 1972 and has about 11,457 members with savings worth €24 million.

In a statement, the Central Bank said payments would be automatically issued by cheque to all verified depositors of RCU, within the statutory deadline of 20 working days. None of the depositors exceeded the €100,000 ceiling in its deposit guarantee scheme.

Governance issues

In relation to its decision to seek the appointment of provisional liquidators, the regulator cited issues relating to governance, internal controls, lending practices and the valuation of its premises.

“Despite assurances given by Rush Credit Union to the Central Bank, and the credit union having been provided with an opportunity to address the issues concerned . . . they have not been adequately addressed.

“In applying for winding-up, the Central Bank has also considered Rush Credit Union’s recent financial performance and its constrained capacity to ameliorate its distressed financial position. In particular, Rush Credit Union is currently balance-sheet insolvent (based on August 31st, 2016, management accounts submitted to the Central Bank by the credit union).

“The Central Bank believes it is necessary to apply for the winding-up having regard to the concerns which it has relating to certain governance and financial issues faced by Rush Credit Union, some of which are already in the public domain. In the absence of taking the proposed action, the nature of the financial, governance and internal controls issues could lead to a disorderly collapse of Rush Credit Union.”

Criminal prosecutions

The winding-up application was made by Paul Gallagher SC, for the Central Bank, who asked that certain material in the petition and affidavits before the court not be published as criminal prosecutions might arise.

The judge granted the order on the grounds there was commercially sensitive information, which it would not be in the interest of the credit union to be revealed.

Mr Gallagher referred to an affidavit by Patrick Casey, the Central Bank's head of resolution for credit institutions, which outlined a number of engagements by the Registrar of Credit Unions, reviews by forensic accountants Grant Thornton and by the Central Bank itself.

Mr Casey said serious deficiencies were found in relation to a number of matters including control of cash, lending practices and the day-to-day running of the credit union.

The registrar issued directions in relation to its business activities, Mr Casey said. Issues arose in relation to a number of matters, including how a car draw was conducted and over certain payments to Revenue. The credit union notified Revenue and gardaí under money-laundering legislation, Mr Casey said.

The court heard there had been no annual meeting called by RCU since 2013, and no dividend paid to members since 2008.

The case comes back before the court on November 21st.