The Bermuda Industrial Union's Credit Union unlawfully lent money to Union Asset Holding last year ? to the tune of almost $3 million.

According to the Credit Union's latest audited financial statements obtained by , a total of $2,829,166 was advanced to Union Asset Holding (UAH), the BIU-owned subsidiary which provided the completion bond for the contract to build the new senior secondary school.

The money, which consisted of a $1.5 million loan and a $1,329,166 share overdraft, was fully paid off by March this year.

But the loans broke more than one provision of the Credit Union Act and put the very existence of the Credit Union at risk ? Government could have suspended or cancelled its registration.

It is understood that the Bermuda Monetary Authority took quick corrective action. Credit Union president Graham Nesbitt was reluctant to comment when contacted yesterday.

"We are monitored by BMA. That was rectified," said Mr. Nesbitt.

And he had no comment on whether any outstanding monies were currently owed to the Credit Union by UAH.

"I can't talk about individual cases but clearly when we find issues of compliance, or matters of concern arise, they would be reported to the Minister as the appropriate authority," BMA general manager Monroe Sutherland said yesterday.

According to the law governing the Credit Union, the loans were not an allowable investment unless they had the approval of the Finance Minister.

And the transactions led to a cash balance shortfall of close to $200,000 ? also in contravention of the Credit Union Act.

In its dispute with Government over the termination of Pro-Active Management Systems' contract to build the school, UAH revealed that it was still owed $4 million by the contractor.

There is no evidence that the Credit Union's loans to UAH actually went to Pro-Active. Nor is there any evidence that the Credit Union advanced it more money after March this year ? sources say that would be unlikely given that the first two unlawful transactions were quickly acted upon by regulators.

Neither BIU president Derrick Burgess nor Finance Minister Paula Cox could be reached for comment by presstime last night.