New London Security FCU Trial Delayed
More than five years after New London Security Federal Credit Union was liquidated, yet another delay could stall payments that some members claim are still due to them.
A trial that was tentatively set to start in January has been pushed back to October 2014, according to former member Mark Fetcher, who told Credit Union Times he received the latest update from an attorney that is working with the NCUA on the case.
Fetcher said he had been a New London member since June 1, 1983. Both his parents and grandparents were members and his father, who died in 1987, once served on the board.
Fetcher said he also shared a joint account with his mother, who died in 2002. The funds in that account exceeded the NCUA’s insurance limit.
“I was told it’s all still in discovery,” Fetcher said. “The attorney said ‘what we’re finding is when we depose one person, then another two people come forward that we need to disposed.’”
The NCUA did not provide a comment by press time confirming the trial delay.
In August, the regulator said delays have largely been caused by various attempts at mediation, settlement of the case and disposing of some administrative claims involving the case, In addition to depositions being delayed due to scheduling conflicts on both sides, people to be deposed who are in Connecticut, Missouri and Texas have slowed the proceedings, Public Affairs Specialist John Fairbanks said in August.
“We expect to depose six to eight people and potentially more if additional information comes to light,” Fairbanks said. “The trial date will depend upon whether discovery can be completed within the presently scheduled time.”
The NCUA liquidated New London Security FCU on July 28, 2008, after determining the credit union was insolvent. Chartered in 1936, the credit union had 365 members and reported assets of $12.7 million.
Edwin F. Rachleff, an A.G. Edwards broker who handled investments for New London Security FCU, committed suicide by jumping from an apartment building on the same day the NCUA seized the financially troubled credit union.
A material-loss review from the NCUA’s Office of Inspector General released in late 2009 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 and custodial agreement with a third party independent of the account manager.
Meanwhile, Fetcher said he fears that time for recovery is slipping away.
“The meter is running with all of these law firms. The lawyers and law firms are considered secured creditors,” Fetcher offered. “We, the members, are not considered secured creditors. With Wells Fargo with years and years of billable hours with their attorneys and law firms, who knows if anything will be left?”
A.G. Edwards & Sons Inc. merged with Wachovia Securities, which in turn merged with Wells Fargo. In January 2009, Wells Fargo was named as a defendant in a suit filed by the NCUA that sought to recover the $11.8 million, which was supposedly deposited into New London’s account from 1998 to 2003. In March 2009, the NCUA also filed an $11.8 million claim to recoup losses against Rachleff’s estate.
In March 2010, the NCUA additionally filed suit against Beller Shepatin and Co., the accounting firm it claimed failed on several counts to detect fraudulent activity in an investment account held by New London. In September 2007, Beller Shepatin merged with Ed Lorah and Associates LLC, which was named as the defendant in the complaint.
Seeking to claim $4 million in losses, five members filed a suit in July 2010 against several entities they said were responsible for the losses including five New London board members, a credit union manager, Wells Fargo Advisors, Beller, Shepatin and Co., Rachleff’s wife, Naomi, who was executor of her husband’s estate, and a law firm that served as general counsel to the credit union. A federal court later dismissed the suit for failing to file within the six-month deadline window after the NCUA board denied their initial administrative claim.