New London Securities Suit Is Dismissed
Nearly a year and a half after several members sued the NCUA to recover $4 million involving the defunct New London Security Federal Credit Union, their case was recently dismissed by a federal court for missing a key deadline.
The five members failed to file their suit within the six-month deadline window after the NCUA board denied their initial administrative claim.
David Small, NCUA spokesman and assistant director of public affairs, confirmed with Credit Union Times that a Federal Tort Claim Act complaint filed by the former members of New London against the regulator was dismissed as being untimely.
In a suit filed in June 2010, the members alleged that New London board members, staff and the CU’s accounting firm, among others, were negligent in supervising financial adviser Edward Rachleff.
Rachleff, who was also an investment broker with A.G. Edwards & Sons Inc., which later merged with Wachovia Securities and then Wells Fargo, handled investments for New London. The CU was declared insolvent and liquidated in 2008 by the NCUA as a result of mismanagement by the deceased Rachleff, who committed suicide on the same day of the liquidation. The losses totaled nearly $12 million.
The NCUA had previously filed lawsuits against Wells Fargo and the CU’s auditing firm, Beller Shepatin, for professional malpractice for failing to detect fraudulent activity. Attorneys for Beller Shepatin denied the claims.
“I’m told the five former members also requested that their FTCA complaint be consolidated with the liquidating agent’s complaint against Wells Fargo,” Small said. “However, the judge declared this request moot in light of his dismissal of the FTCA complaint.”
Small said the NCUA is “very pleased by the judge’s decision."
A material-loss review from the NCUA’s Office of Inspector General found that the agency’s examiners failed to adequately evaluate the risk in New London’s investment program. The OIG also said New London’s collapse was caused by several factors, including the lack of a safekeeping/custodial agreement with a third-party firm.