CLEVELAND – A local church, emerging as one of the biggest victims of last year’s collapse of St. Paul Croatian FCU, filed suit in federal court here Friday over NCUA’s denial of a $1.5 million deposit insurance claim, the latest in a growing number of legal claimants in the widening scandal.
In its suit, Holy Love Ministry, which had a representative on the board of the credit union, said it tried to withdraw the $1.75 million it had on deposit at St. Paul Croatian days before the NCUA took the $220 million credit union under conservatorship April 24, 2010, only to be told by an NCUA examiner to wait until the following Monday when the examination would be completed because such a large withdrawal would cause problems with the credit union’s books. The church’s board representative then made the same withdrawal request of an interim manager who had been appointed by NCUA, who also told him to wait.
The following day the NCUA Board placed the credit union into conservatorship, then liquidated it a few days later amid a fraud probe that indicated as much as $170 million had been siphoned from the institution, one of the biggest credit union frauds ever. At that point, NCUA agreed to pay depositors up to $5,000 to tied them over as it began to review the assets of the credit union.
The church was eventually paid $250,000 by NCUA during the liquidation of St. Paul Croatian, leaving it with a loss of $1.5 million. The agency notified Holy Love Ministries and all the other institutional investors that the balance of their accounts exceeded their coverage, so was uninsured.
At the time, the church, located in the Cleveland suburb of Elyria, had committed $12 million to a two-year building program. The funds on deposit with St. Paul Croatian were supposed to have been used as security for the building program. As a result, “The (credit union) loss has rendered Holy Love’s situation desperate,” says the suit.
Holy Love is one of several Cleveland churches, businesses, individual members, as well as outside credit unions who have been left holding millions of dollars in uninsured deposits at St. Paul Croatian FCU. Authorities have charged nine individuals, including the credit union’s CEO, with a massive loan fraud they believe sent funds to international crime syndicates in Croatia, Albania and elsewhere in the Balkan countries.
Other victims include: St. Mary of the Assumption Roman Catholic Church in the Cleveland suburb of Eastlake, where the credit union was based, a loss of $150,000; Cascade FCU of Kent, Wash., a loss of $251,000; Acme FCU of Eastlake, $127,000; and Employees CU of Dallas, a much smaller amount. At least three individual members have also filed suits against NCUA saying they have lost uninsured deposits. One elderly couple says it lost more than $500,000, the bulk of their retirement savings.
In these cases NCUA said it covered deposits for individuals up to $250,000 per account, under federal deposit insurance laws, but for businesses and other institutional entities the coverage will only be a total of $250,000. The rejection of claims by individuals is more complicated, sometimes because of joint ownership of accounts. NCUA said in response to the suits, “Share Insurance payouts in liquidations are made in accordance with Part 745 of NCUA’s regulations after a review of the nature and type of account involved.”
Holy Love Ministry said NCUA denied its appeal of the insurance coverage because the agency said the appeal was beyond the scope of the administrative process. But a letter posted by NCUA to members in the days after the 2010 conservatorship says the agency will review appeals on a case-by-case basis and will consider certain extraordinary events, such as a home purchase. The church said it $12 million building commitment should qualify as such a “hardship.”
The suit says the interim manager NCUA appointed to run St. Paul Croatian, Andy Bauman, told the church representatives they could file a hardship claim in the liquidation of the fraud-riddled credit union, even though NCUA later told the church that no such hardship claims exists under the Federal CU Act.
The Ohio church says NCUA “holds significant responsibility for the losses” it has suffered and cited two separate reports from the NCUA Office of the Inspector General saying NCUA examiners failed to see the huge fraud being committed by the credit union and its manager.
Federal authorities have charged the former CEO of St. Paul Croatian, Anthony Raguz, with accepting more than $500,000 in bribes to approve millions of dollars in loans to members who had no intention of repaying the funds. Among those charged are Koljo Nikolovski, a purported criminal ring leader in Macedonia, who is believed to have sent at least $5 million of St. Paul Croatian loan proceeds to banks in Skopje, Macedonia and Albania. The two men and seven others charged in the case are awaiting trial.
