NEW LONDON, Conn.-NCUA filed suit in federal court Friday against Wells Fargo Investment Advisors seeking $10 million they believe a now-deceased investment advisor working for the brokerage stole from New London Security FCU, which the agency shut down in July 2008.
The investment advisor, 82-year-old Edwin Rachleff, leaped to his death from the top floor of a nearby senior citizens home the same day the 73-year-old credit union was being taken over and liquidated by NCUA, which found as much as $12.1 million of funds missing from the $12.7 million institution. NCUA believes Rachleff, who served as a director of the credit union for 19 years as well as its investment advisor, stole the funds.
In its suit, NCUA claims that Rachleff took the credit union funds he was purporting to invest through A.G. Edwards and siphoned them to an account he held in the name of Elmore Shoe Company, a defunct company he and his wife once owned. "Rachleff continued this practice from 1988 until July, 2008, when the fraud was uncovered and Mr. Rachleff committed suicide, NCUA says in the suit.
Wells Fargo ended up as a potentially liable party in a round-about way. Rachleff worked for A.G. Edwards when he began advising New London Security and the fraud scheme apparently began, then A.G. Edwards was acquired by Wachovia, which was itself eventually bought by Wells Fargo. In its suit, NCUA is asking that Wells Fargo reimburse the agency for losses accrued to liquidate the credit union under a contract guarantee.
NCUA says as the corporate successor to A.G. Edwards/Wachovia, Wells Fargo is responsible for the Rachleff fraud. Negotiations between the two sides recently broke down, prompting the NCUA suit.
