NCUA First in Recouping Failed CU's Losses
As the liquidating agent, the NCUA said by law, it is the party, not members or others, to pursue actions first to recover monetary losses that followed the failure of New London Security Federal Credit Union.
The agency was responding to a suit initially filed by five members of New London in June seeking $4 million claiming board members, staff and the CU's accounting firm among others were negligent in supervising its financial adviser, Edwin F. Rachleff, who is now deceased. Rachleff's mismanagement led to the credit union's liquidation in 2008.
"As liquidating agent, the NCUA Board by law is the successor in interest to the rights of the members, and therefore the correct party to pursue such actions," wrote John McKechnie, NCUA director of public and congressional affairs, in a Dec. 13 e-mail to Credit Union Times.
In a November motion, the NCUA said once the agency collects what it is due, members would be then paid any other amounts due, TheDay.com reported. The members have since been paid up to $100,000 per account, the insurance limit at the time of New London's liquidation.
The NCUA has filed suit against New London's former accountant and Wells Fargo to recover nearly $12 million as a result of the credit union's mismanagement. Last week, the NCUA's Office of Inspector General said that examiners failed to expand its procedures or follow through with stronger supervisory actions.A separate OIG report released in 2009 provided more details on what led to New London's collapse.