CUMIS Rejects $72 Million NCUA Bill In Huge Ohio Fraud
CLEVELAND – CUNA Mutual Group’s CUMIS Insurance Society has denied a $72.5 million fidelity bond claim filed by NCUA for the 2010 failure of St. Paul Croatian FCU, brought down by a huge fraud.
NCUA has filed suit in federal court here to force the credit union insurer to reimburse the National CU Share Insurance Fund for some of the estimated $170 million in losses accrued by St. Paul Croatian.
In denying the bond claim, CUMIS claims it is rescinding the bond based on alleged “material misrepresentations and concealment of material facts” made by the credit union’s CEO Anthony Raguz, who has been indicted for a huge phony loan scheme that sunk the one-time $240 million credit union. Prosecutors allege Raguz accepted more than $500,000 in kickbacks to approve millions of dollars in loans to borrowers who had no intention of repaying, including an alleged international crime figure who wired some $6 million of credit union funds to banks in Croatia and Macedonia. Federal prosecutors have obtained criminal indictments against Raguz and 15 of the borrowers, including Koljo Nikolovski, who authorities say heads a local crime syndicate in Skopje, the capital city of Mecedonia. Raguz and Nikolovski are in federal prison awaiting trial in the case.
NCUA, which has legal rights to all claims by the credit union as its liquidating agent, says the CUMIS bond was supposed to insure the credit union against all losses arising from employee or director dishonesty. In denying the bond claim CUMIS told NCUA that Raguz misstated his knowledge of “any act, error or omission which might give rise to a claim,” thereby nullifying the bond. In its suit NCUA claims that the CUMIS bond does not warn that a misstatement or misrepresentation renders the bond void.
On October 8, 2010, CUMIS acknowledged the losses but has continued to deny coverage based on the attempted rescission of the bond, according to the suit, filed in U.S. District Court for the Northern District of Ohio.
Officials at CUNA Mutual declined to comment but noted that in the worst case scenario the company's legal liability is capped at $5 million in this case.