NEW HAVEN, Conn. – A group of members of New London Security FCU are appealing the dismissal of their suit claiming NCUA is responsible for $4 million in uninsured deposits they lost from the 2008 failure of the $13-million credit union.
The members claim NCUA is responsible for all of their losses because its examiners failed – for more than a decade – to spot a fraud by the credit union’s elderly investment manager who also was a director, wiping out $12 million of the credit union’s assets. The 82-year-old investment manager, Edwin Rachleff, leaped to his death from the 11th floor of a nearby building just hours after NCUA shut the 72-year-old credit union, chartered to serve local Jewish affinity groups.
In their suit, Melvin Goldblatt, Joan Lazerow, Mark Fetcher, Gloria Johnston and Douglas Antupit claim NCUA is responsible for their losses because its examiners ignored signs of the fraud and failed to conduct on-site reviews for years at a time. Their suit, however, was dismissed by the lower court because they failed by three weeks to file their claim within the legally allotted time frame.
NCUA paid almost $10 million to New London Security members but denied claims for anything over $100,000 per account, which was the legal limit on federal deposit insurance coverage at the time. The limit has since been increased to $250,000 per account.
An internal report issued by NCUA’s own Inspector General found that had NCUA taken stronger supervisory actions it might have uncovered the fraud sooner and mitigated the final losses.
The member group filed their appeal Friday with the U.S. Court of Appeals for the Second Circuit.
