CLEVELAND – A federal court on Friday rejected a bid by a tiny church here to recover $1.5 million it lost in 2010’s failure of St. Paul Croatian FCU from perpetrators of the massive credit union fraud and ruled that decision is up to NCUA, which itself is expecting to be left with $170 million in losses in the case.
Holy Love Ministries, had taken out almost $1.8 million in CDs with the credit union and was reimbursed by NCUA like all other depositors for the maximum allowable $250,000 under federal deposit insurance rules when the credit union went bust in April 2010, leaving the tiny church with a loss of $1.5 million. The church, the biggest victim of the credit union fraud, says it will have to file for bankruptcy unless it recovers the funds.
The church, which had a representative on the board of the $240 million credit union, tried to withdraw its funds in the days just prior to the NCUA takeover of the failed credit union, but was told by NCUA officials to wait until after the weekend to pull its money, lest it prompt a run on deposits. But the following day NCUA took St. Paul Croatian under conservatorship amid a massive loan fraud and limited depositors to $5,000 withdrawals until a determination on the maximum $250,000 withdrawals were made. The following week, NCUA liquidated the 67-year-old credit union, causing Holy Love to lose $1.5 million, the money they attempted to withdraw a week earlier.
The church first made a plea to the NCUA Board for the remainder of its funds, but its administrative appeal was rejected, and has since followed that up with a civil suit against NCUA. Holy Love Ministries has also sought to attach its claims to criminal cases brought against the chief perpetrators of the fraud; the credit union’s CEO Anthony Raguz, Koljo Nikolovski, a Balkans crime lord, who has agreed to pay $3 million restitution in his guilty plea; and several straw borrowers who funneled millions of dollars fraudulent loan proceeds to Nikolovski.
But on Friday, the U.S. District Court for the District of Northern Ohio issued an order denying the church’s claim on the millions in restitution payments, ruling Holy Love Ministries “has no standing to assert itself as a victim - as that designation is solely for the NCUA under federal law.”
Holy Love is one of several Cleveland churches, businesses, individual members, as well as outside credit unions who have been left holding millions of dollars in uninsured deposits at St. Paul Croatian FCU. Other victims include: St. Mary of the Assumption Roman Catholic Church in the Cleveland suburb of Eastlake, where the credit union was based, a loss of $150,000; Cascade FCU of Kent, Wash., a loss of $251,000; Acme FCU of Eastlake, $127,000; and Employees CU of Dallas, a much smaller amount. At least three individual members have also filed suits against NCUA saying they have lost uninsured deposits. One elderly couple says it lost more than $500,000, the bulk of their retirement savings.
Twelve individuals, including the credit union’s CEO, have been convicted of a scheme by which they obtained tens of millions of dollars in loans they never intended to repay.
NCUA estimates the failure of St. Paul Croatian will cost the National CU Share Insurance Fund $170 million in losses, making it the biggest credit union fraud ever.
