Five persons who filed a lawsuit against board members and staff of the liquidated New London Security Federal Credit Union are now going after the NCUA to recoup losses stemming from alleged investment fraud.
In a motion filed in July with the U.S. District Court in Bridgeport, Conn., the plaintiffs claimed the NCUA was negligent in oversight of New London, which lost nearly $12 million after deceased financial advisor Edwin Rachleff committed alleged fraud with the CU's investment accounts.
The latest motion from the plaintiffs cites the NCUA Office of Inspector General material-loss review report released fall 2009 that said New London's management failed to implement adequate internal control over the CU's investment activity. The OIG also acknowledged that NCUA's examiners failed to adequately evaluate the risk in New London's investment program.
Robert Reardon, the attorney representing the plaintiffs, could not be reached for comment. The NCUA would only confirm that a motion relating to it and New London had been filed. Reardon told theday.com that the OIG report was the impetus for bringing a suit against the NCUA saying it offered "a very detailed analysis of why this terrible financial loss occurred."
In June, the five plaintiffs filed a suit against five board members, a CU manager, Wells Fargo Advisors, auditing firm Beller, Shepatin & Co., Rachleff's wife, who is executrix of Edwin's estate, and a law firm that served as general counsel to the CU. Rachleff was an investment broker with A.G. Edwards & Sons Inc., which later merged with Wachovia Securities and then Wells Fargo. The plaintiffs are seeking to recoup $4 million.