ALEXANDRIA, Va. – NCUA reported this morning that May’s failure of St. Paul Croatian FCU was caused by fraud and will cost the National CU Share Insurance Fund as much as $170 million in losses, one of the biggest losses ever for a non-corporate credit union.
A Material Loss Review released this morning by NCUA’s Office of the Inspector General on the failure of the credit union for the area’s Croatian-American population concluded that while the credit union had reported as recently as December that most of its $238 million in loans were secured by shares (deposits), most of them were not secured by shares and “a number of them were allegedly fraudulent.” The CEO of the credit union, said the Inspector General, tried to cover up the scheme by manipulating the credit union’s books.
Law enforcement authorities are currently investigating the alleged fraud, sources revealed to the Credit Union Journal last week. NCUA liquidated St. Paul Croatian FCU on May 1, just days after taking the credit union, which claimed some 13% capital as of March 31, under conservatorship. The quickness in which NCUA liquidated a credit union it had just taken over was unusual.
The collapse of St. Paul’s Croatian came weeks before the failure of a Canadian credit union serving Toronto’s Croatian immigrant population that authorities attributed to a real estate scheme known as “the Oklahomas” for its origin. The fraud cost members of the Croatian CU some $9 million. Under the Oklahomas scheme four individuals working through the credit union were able to obtain fraudulent mortgages on undeveloped parcels of land, located in rural Ontario, according to charges against the four.
