Uninsured Depositors Seek Millions From NCUA In Spectacular CU Failure
NEW LONDON, Conn. – Uninsured members of New London Security FCU filed suit against NCUA last week seeking $4 million and damages in the 2008 failure of the $13 million credit union where the elderly investment manager leaped to his death from an 11-story building as authorities were preparing to arrest him for fraud.
The suit filed Friday in federal court here claims that NCUA was negligent in examining the credit union’s investments, which Edwin Rachleff had embezzled and deposited into his own accounts.
The new suit follows last month’s dismissal of a suit brought by the same members against Wells Fargo, which acquired A.G. Edwards, the investment broker that employed Rachleff, who also served as a director of the credit union. Several other suits are pending in the case.
The scheme was uncovered on July 28, 2008, hours before 82-year-old Rachleff jumped to his death from the 11th floor of a nearby building, as NCUA was taking over the credit union. A subsequent audit conducted by NCUA revealed Rachleff had misappropriated more than $12 million of the credit union’s funds, rendering the credit union insolvent.
The new suit claims NCUA failed to adequately conduct annual evaluations over a 20-year period, the NCUA examiners consistently, improperly and negligently evaluated the transactional risk to member investors, “when in fact the investments of the [members] were at high risk of loss or embezzlement.”
The members, Melvin Goldblatt, Joan Lazerow, Mark Fetcher, Gloria Johnston, and Douglas Antupit, say they lost $4 million in uninsured deposits when NCUA paid off members during the liquidation of the 72-year-old credit union.