The regulator liquidated the $12 million credit union in July 2008 for insolvency. That same day, Edwin F. Rachleff, an A.G. Edwards broker who handled investments for the New London, Conn.-based financial institution, committed suicide by jumping from an 11-story apartment building.
The NCUA claimed that Rachleff created fake account statements showing the credit union was worth $11.8 million, TheDay.com reported on March 11. According to a Dec. 10, 2008 letter filed with the New London Probate Court, there was only one account kept in the credit union's name with A.G. Edwards, the Elmore Shoe Co., which was at some point owned by the Rachleff family. New London Security supposedly deposited money into the account from 1998 to 2003; however the $11.8 million the NCUA is seeking was not there, the letter read.
The missing investment funds not only resulted in the credit union becoming insolvent, but consequently led to its closure and liquidation, the NCUA said in the probate letter. New London Security members and the NCUSIF "have been harmed by the missing investment funds," the regulator noted.
"The credit union relied on these fraudulent [account] statements in making its necessary annual financial disclosures, including the missing $11.8 million in investments," the NCUA wrote.
The NCUA did not respond to requests for further comments beyond the probate letter.
A June 2008 statement that accompanied the December letter listed the credit union's accounts at A.G. Edwards including investments in the U.S. Fed Farm Credit Banks, U.S. Fed. Home Loan Banks and the U.S. Fed. Home Loan Mortgage Co. According to Kari Olson, an attorney with law firm Murtha Cullina LLP who is overseeing the probate case, the accounts were "fraudulently created and provided by Mr. Rachleff" and do not exist, TheDay.com reported.
"I am not at liberty to discuss the status of this
matter, which is an ongoing investigation," Olson told Credit Union Times.
The NCUA may have a hard time collecting the $11.8 million. Rachleff's will listed $37,275 in assets with shares in various companies, according to his probate file. Justin Gioia, a spokesman for Wachovia Securities LLC, had previously confirmed with Credit Union Times that Rachleff served as a financial advisor with A.G. Edwards, which merged with Wachovia in October 2007. He had been with the firm since 1988. Rachleff did not have any customer disputes, disciplinary or
regulatory actions filed against him, according to the Financial Industry Regulatory Authority.