Well, if anyone can afford a settlement!

A lingering personnel dispute at the Northern Savings Credit Union has come to a conclusion, as the Credit Union chose to bring to an end a legal challenge to a court award and ended up paying out more in a court award than they had originally anticipated.

Despite the Credit Union winning on what they call three of four points of law, the defendant in the case, Jacob Keith Brumby, the former employee, won on one point, which it would appear was financially rewarding to his case.

The genesis of the court case came about as part of the Credit Union’s entry into the southern BC real estate, when the Credit Union formed the Mortgage Investment Group (MIG), which securitized residential mortgages, mostly in the super heated southern BC economy.

The Daily News had the details on the case in its Thursday paper.

NORTHERN SAVINGS TOLD TO PAY EX-WORKER
By Leanne Ritchie
The Daily News
Thursday, April 12, 2007
Pages one and three

The B. C. Supreme Court has awarded a former employee of Northern Savings Credit Union’s Mortgage Investment Group (MIG) an additional $180,000 in bonuses, above and beyond what the credit union anticipated paying him.

Jacob Keith Brumby took Northern Savings to court to try and claim almost a million in bonus payments. He spent two years as the chief investment officer for the Mortgage Investment Group in Victoria and was terminated in August 2005.

Last month the court award Brumby $410,000 for the 2005 year.

“There were four points of law in the case. We won four points of law in the case. We won on three of them and the plaintiff won on one. The one in which we did not win had to do with the amount of profit from that division of the credit union and the bonus owed him was based upon an agreement we had,” said Mike Tarr, chief executive officer of Northern Savings Credit Union.

“In this case, like a lot of these cases, the judges tend to come down somewhere in the middle. The plaintiff had been asking for about a million dollars and we had offered $230,000 and so the award of $410,000 wasn’t terribly surprising but we were a bit disappointed.”

The point on which the credit union lost had to do with an expansion of the types of loan handled by the MIG.

When first started, the MIG’s original business plan was to securitize residential mortgages.

According to the court documents, t his involves granting residential mortgages to the public and then subsequently transferring the income stream to a third party for a profit based on the difference in interest rates.

“During the financial successes of the first year and upon the urging of the plaintiff (Brumby), some lenders and the company’s primary sales person, MIG, commenced to invest more risky loans known as B loans.

These B loans could not be securitized (transferred to a third party,) so MIG was required to keep them on their books. This increased the risk to MIG but also yielded increased profits,” reads the court case.

While Northern Savings argued Brumby’s contract did not include a bonus for the B loans, the judge ruled that Brumby’s bonus should be based on all the profits, including the B loans.

Although Northern Savings was disappointed with the result of the case, Tarr said they won’t be appealing the ruling.

“We’ve spent enough on lawyers. We have decided to accept the ruling and move on,” Tarr said.

“It was a very unusual thing to happen to us. We weren’t really expecting like this to happen but this individual was pretty aggressive and that’s where it went.”

He added the reason the bonus is so large is because 2005 was an incredibly good year for the MIG.

“That’s why the number is so large. Normally, especially at a credit union, you wouldn’t have bonuses like that but it was such an extraordinary year that was what the agreement generated. It was one of those years when everything worked,” said Tarr.

The ruling doesn’t affect Northern Savings 2007 financials.

“We have already put money aside for it form previous years so it will have absolutely no financial impact in 2007,” he said.

The Northern Savings MIG was formed in March 2004, in response to the decline in the Northwestern economy.

Establishing the MIG allowed Northern Savings to benefit from the active Southern B. C. real estate market while continuing to be an active supporter of Northwestern communities.