NCUA Intervenes in Loan Participation Fraud Suit
A Virginia judge has ruled the NCUA can intervene in a lawsuit against three former employees of the failed $13.8 million Lynrocten Federal Credit Union.
The $20 million Northern Piedmont Federal Credit Union of Culpeper, Va., filed the lawsuit earlier this year against former Lynrocten manager Linda Susan Newcomb and employees Teresa Humphries and Becky Nichols, who worked at the Lynchburg, Va.-based cooperative until May 30, 2013, when it was liquidated by the NCUA.
The lawsuit accuses the three women of loan participation fraud.
Northern Piedmont seeks to recover almost $1.7 million, according to the complaint.
According to court documents, Northern Piedmont wired more than $3 million to Lynrocten from 2009 to 2011 under agreements based on fraudulent misrepresentations.
“Newcomb and Humphries concocted a scheme to originate loans, allegedly including the loans in which Northern Piedmont purchased participations, in members’ names without the members’ authorization,” the complaint stated.
NCUA attorney Kevin Holt, who filed a motion to intervene as a defendant in the case, stated that Northern Piedmont’s lawsuit is premature and could potentially deplete the pool of assets available to all parties.
By being allowed to intervene, Holt said the NCUA would be able to carry out the purpose of the Federal Credit Union Act and facilitate an orderly liquidation.
Amherst Circuit Court Judge J. Michael Gamble, who granted the motion, agreed that the Federal Credit Union Act allows the NCUA to intervene.
“Because this litigation concerns an asset of Lynrocten, no court has jurisdiction over this cause of action until the NCUA completes its liquidation process,” Gamble wrote in a March 21 letter to attorneys involved in the case.
By intervening, the NCUA could seek to move the case to U.S. District Court in Lynchburg and attempt to have it dismissed.
Johan Conrad, a Norfolk, Va., lawyer representing Northern Piedmont, declined to comment when contacted by CU Times.
A message left with Dortha Johnson, president/CEO of the 4,400-member Northern Piedmont, was not returned by press time. Johnson previously said Northern Piedmont is trying to recover its losses.
Humphries, who was the head teller at Lynrocten for more than three decades, pleaded guilty in U.S. District Court to embezzling more than $1 million. She admitted stealing $3,000 to $4,000 a month between 2007 and 2013, which she deposited into family members’ accounts, according to court documents.
Humphries is set to be sentenced June 24. She faces a maximum of up to 30 years in prison and a fine of up to $1 million.
To date, the U.S. Attorney’s Office has not confirmed charges against Newcomb or Nichols.