November 14, 2014
By Bob Coleman
Editor, Coleman Report
A fund that Illinois cities park investment funds has been hit to the tune of $50 million says The Illinois Metropolitan Investment Fund.
The impact is immediate. Downers Grove, a 50,000 population suburb of Chicago has an exposure of $586,000. Village officials have ben been notified they will not have access to these funds “until the matter is resolved.”
“The Village is one of 293 governmental entities that invests funds in IMET and has been affected by the fraudulent activity.
“IMET has advised the Village of its intent to recover the funds. The Village will closely monitor the fund recovery process and will explore options to recover the full amount if IMET is unable to do so. Until this matter is resolved the Village does not have access to this $586,000.
“The potential loss of up to $586,000 will have no immediate impact on operations due to the Village’s strong financial position,” reads the statement on the Downers Grove website.
Says the IMET, “As you may know, IMET’s Convenience Fund invests in repurchase agreements involving loans that are guaranteed by the United States Department of Agriculture (USDA). Each such guarantee of the USDA is an obligation supported by the full faith and credit of the United States.
“On September 29, 2014, IMET was informed of defaults on certain guaranteed loans totaling $50,442,142.78 caused by fraud on the part of a USDA approved lender. This amount is only approximately 2.8% of the net asset value of the Convenience Fund. IMET’s agent for the loans, Pennant Management, is making a demand on the USDA within the next few days to collect on the USDA guarantees of these loans. We expect the USDA to act on the demand for them to repurchase these loans together with accrued interests pursuant to their guarantees within 30 days after the written demand, as required by the USDA regulations.
“Pursuant to Board action as of September 30, 2014, we have segregated the portion of your investment in these loans (based on your pro rata interest in the Convenience Fund) in a restricted account, where it will remain until IMET concludes its guarantee demand with the USDA. You will receive a restricted account statement along with your other monthly statement(s).”