Fraud At St. Paul Croatian FCU Leaves Other CUs Holding The Bag
CLEVELAND – Several credit unions with deposits at St. Paul Croatian FCU are counting their losses from last year’s fraud-related failure of the one-time $240 million credit union.
The NCUA Board last month behind closed doors rejected pleas by two credit unions, Cascade FCU and Acme FCU, for reimbursement of losses beyond the $250,000 coverage of federally insured deposits, meaning Cascade is expected to accrue a $250,916 loss and Acme a $127,391 loss. Earlier, Employees CU of Dallas was denied a small claim in the case. Several other credit union CD holders also are expected to accrue losses from the big failure.
NCUA took over the Cleveland credit union on April 23 last year, then liquidated it less than a week later amid signs that a massive fraud had erased tens of millions of dollars of its capital. Last month nine individuals, including the credit union’s CEO Anthony Raquez, and purported Macedonia crime figure Koljo Nikolovski, a member of the U.S. credit union, were indicated on charges they participated in a fraud that drained as much as $170 million from the credit union.
The CEO was charged with receiving at least $500,000 in kickbacks in exchange for approving millions of dollars in loans to Nikolovski and others who had no intention of repaying the money. Nikolovski, who is being held without bail, transferred millions of dollars of the loan proceeds to bank accounts in Skopje, Macedonia, according to law enforcement officials.
In arguing for reimbursement of uninsured deposits, both Cascade FCU and Acme FCU told NCUA in buying the CDs they relied on St. Paul Croatian financial statements that were reviewed and approved by NCUA examiners. But NCUA said it “does not bear liability to [the credit unions] for failing to detect the fraud that led to the FCU’s insolvency.”
Kent, Wash.-based Cascade had invested $500,000 in a CD with St. Paul Croatian and was reimbursed $250,000 of federal deposit insurance coverage.
Acme, based in the Cleveland suburb of Eastlake, Ohio, maintained a share account holding $77,391 with St. Paul Croatian and three five-year CDs with $100,000 each.
After NCUA took over the troubled credit union, both credit unions requested withdrawals of their funds but NCUA limited withdrawals to just $5,000 each to prevent a run on the institution.