In response to an NCUA complaint, the auditors for New London Security Federal Credit Union have denied claims of professional malpractice for the cooperative that was liquidated in 2008.
According to several media reports, Beller, Shepatin and Co. PC, Robert Shutsky, an employee at the accounting firm, and Ed Lorah and Associates LLC, which was a successor firm, filed a June 11 response denying the NCUA's allegations. In its March 19 complaint, the NCUA alleged professional malpractice because Beller failed on several counts to detect fraudulent activity in an investment account held by the defunct New London in Conn. As a result, the CU was unable to prevent or mitigate the damages caused by the fraudulent investment account, ultimately losing virtually all of its assets.
Calls to the defendants' attorneys were not returned.
Since at least 1994, New London used Beller to conduct audits and reviews of its financial statements, according to NCUA's complaint. In several reports, the accounting firm concluded that the CU's statements "fairly presented, in all material respects the financial condition of the credit union." Issued in October 2001 and October 2007, the auditor's reports showed the CU's assets at $10.4 million and more than $12.4 million, respectively.
The deceased Edwin Rachleff was an investment broker and financial adviser for A.G. Edwards & Sons Inc., which later merged with Wachovia Securities and then Wells Fargo, who handled investments for New London. Rachleff allegedly created fake account statements that showed the CU was worth $11.8 million, according to the regulator. The losses led to the liquidation of New London.