NCUA Still Seeks $11M From Adviser's Mismanagement
In July 2008, Edwin R. Rachleff, an A.G. Edwards broker who handled investments for the credit union, committed suicide the same day that the NCUA liquidated the financial institution for insolvency (CU Times, March 18, 2009). Rachleff allegedly created fake account statements that showed New London Security was worth $11.8 million, according to the NCUA. The funds were supposedly deposited into the credit union's account from 1998 to 2003. However, the $11.8 million the NCUA is seeking was not there. As a result of the missing funds, the credit union was declared insolvent and then liquidated.
In a Dec. 7 e-mail, an NCUA spokesman told Credit Union Times, "NCUA is discussing possible settlement with the CU's outside accounting firm and Wells Fargo (the successor to A.G. Edwards). If we do not reach settlement, we may pursue legal action." The spokesman did not know when the settlement talks would conclude.
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.
A June 2008 statement that accompanied the December letter listed the credit union's accounts at A.G. Edwards, including investments in the Federal Farm Credit Banks, Federal Home Loan Banks and the Federal Home Loan Mortgage Co. As of March, Rachleff's will listed $37,275 in assets, with shares in various companies, according to his probate file.
In related news, according to the Financial Industry Regulatory Authority, in October, a person filed a claim against Rachleff for the alleged misappropriation of $7.5 million. Rachleff's FINRA broker check report did not reveal the identity of the person or if he or she was a CU member. At the time of the complaint filing, Rachleff was employed by Wells Fargo Advisors LLC. The case is still pending, according to the report. Rachleff served as a financial adviser with A. G. Edwards, which merged with Wachovia Securities LLC in October 2007, and with Mosley Securities Corp. and Yarnall Biddle and Co.