The National Credit Union Administration said Wednesday that May's failure of St. Paul Croatian Federal Credit Union in Cleveland was caused by fraud and will cost the National Credit Union Share Insurance Fund as much as $170 million, one of the biggest losses ever incurred by a noncorporate credit union.
A material loss review released by NCUA's Office of the Inspector General on the failure concluded that while the credit union had reported as recently as December that most of its $238 million in loans were secured by shares, or deposits, most were not, and "a number of them were allegedly fraudulent."
According to the review, the credit union's chief executive tried to cover up the scheme by manipulating the books. Law enforcement authorities were investigating the alleged fraud, sources said last week.
The NCUA liquidated St. Paul Croatian Federal Credit Union on May 1, days after taking it under conservatorship.
The collapse came weeks before the failure of a Canadian credit union that, like St. Paul Croatian, served a Croatian immigrant population. Authorities attributed this failure to a real estate scheme known as "the Oklahomas" for its origin. The fraud cost members of St. Paul Croatian some $9 million.