Legal Battle Breaks Out Over Uninsured Member Deposits

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ALEXANDRIA, Va.-NCUA's policy over the new $250,000 deposit coverage is causing widespread confusion among credit union members and prompting a growing number of challenges to the agency's payouts after credit union failures.

In a suit filed Friday in federal court in Cleveland an elderly couple claims NCUA's payout of $860,000 in five carefully structured accounts at St. Paul Croatian FCU is not adequate under the new deposit insurance law and the agency still owes them $165,000.

Steve Skertic, 85, and his 76-year-old wife Marija Skertic, say they carefully structured their deposits in the one-time $240-million credit union so that no single account exceeded the $250,000 limit for federal deposit insurance. In rejecting their administrative appeal, NCUA says because the elderly couple added two friends as joint account-holders in order to extend coverage to two additional accounts, the joint account-holders must share the $250,000 payout on each account on a pro rata basis of ownership.

The Cleveland retirees, members of the credit union since 1970, are among a growing number of uninsured depositors victimized by the collapse of St. Paul Croatian in the biggest credit union fraud ever.

NCUA has also rejected millions of dollars in claims from institutional members of St. Paul Croatian, ruling that while individuals are entitled to $250,000 coverage for every account, non-individuals, like businesses, are only entitled to a maximum of coverage of $250,000. This stance cost Holy Love Ministries $1.5 million that the tiny Elyria, Oho, church thought it had obtained federal deposit coverage for after carefully structuring its accounts to less than $250,000 each.

Several credit union holders of Jumbo CDs in St. Paul Croatian also lost funds under this policy, including Cascade FCU of Kent, Wash., $251,000 in uninsured deposits, Acme FCU of Eastlake, Ohio, $127,000 in uninsured CDs, and Employees CU of Dallas, a much smaller amount.

In another case, NCUA told a St. Paul Croatian member that even though he had 11 CDs all under $250,000 they were all deposited in a single account, therefore the member's excess of more than $1 million in the 11 CDs was uninsured.

NCUA insists it is not responsible if members were poorly informed about their rights under deposit insurance coverage. "Furthermore," said NCUA in one of the appeals, "statements made by credit union employees (are not binding)."

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