Members Seek Recompense for Ponzi Scheme Losses

REIDSVILLE, N.C. – More than a dozen members–half of them founders–of American Partners FCU are seeking repayment of millions of dollars of funds a third-party investment advisor lost when he put the money in a failed investment pool that regulators have labeled one of the biggest “Ponzi” schemes ever. Lawyers for the group are scheduled to meet in mediation with representatives of the credit union, which maintains it is not responsible for the losses–representing the entire retirement savings for several of the members. As many as eight of the members were workers at the American Tobacco Company plant that chartered the credit union in 1975. Fourteen of the members have filed suit in state court claiming the credit union should have known the third-party advisor working out of its offices was investing the funds in Evergreen Ltd., a massive Ponzi scheme that failed in 2002, costing more than 2,000 investors in excess of $200 million. In a Ponzi scheme, early investors are paid from money put in by later participants, making it appear that the investment is legitimate. The credit union board learned of the failure of Evergreen and its effects on the members in 2001, according to minutes of board meetings obtained by the members’ lawyers. Philip Mohr, an attorney representing the members, said credit union officials maintain they were unaware of the advisor’s investments in Evergreen and are not responsible for the losses. “They have continuously refused to talk about a settlement,” Mohr told The Credit Union Journal yesterday. Credit union officials did not return phone calls seeking comment. As many as 35 members invested in what was purported to be federally guaranteed bonds in an entity called Worldwide Ltd., which turned out to be a conduit for investments in Evergreen. The 14 members represented in the suit are seeking repayment of the $1.5 million they invested, which would have amounted to as much as $3 million with promised interest.