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ALEXANDRIA, Va. – This summer may possibly close a chapter on what the Securities and Exchange Commission has described as one of the largest cases of investor fraud the agency has seen in its 72-year history. The case involves Bentley Financial Services and the sale of fake certificates of deposits from 1994 to 2001 to more than 200 clients including a number of credit unions. More than $370 million were invested in the CDs and at last count, $339 million had been returned to investors, according to David Marion, the court-appointed receiver. Robert L. Bentley, owner of the now defunct-firm, is currently serving a 55-month prison sentence for mail fraud and bank bribery. The latest update came on June 8 when a federal jury found that a both Florida bank and securities firm were found liable for an additional $33 million for their parts in the scam. The enormity of the “Ponzi scheme” caught the attention of NCUA and even prior to it, the agency had constantly reminded credit unions to exercise extreme due diligence. Former NCUA Board Member Debbie Matz reiterated that warning in an October 2003 speech before a Mid-States Corporate Federal Credit Union economic forum. She said while many credit unions turn to CD brokers “in an effort to realize higher yields on their investments,” they still “must be aware that each new business partner brings new risk.” Of the 98 credit unions contracted with Bentley, Matz said she was surprised at the lack of due diligence exercised. Several of the credit unions’ net worth fell below 6%, which made them subject to prompt corrective action and net worth restoration plans, she pointed out. “It is amazing to me that not one of these 98 credit unions performed due diligence to make sure they were dealing with a reputable firm,” Matz said at the time. “Had they checked, they would have discovered that Bentley was not a registered broker.” Further, Matz said Bentley was using a safekeeper that was in violation of NCUA’s investment regulation. She equally placed blame on NCUA examiners. “I was equally amazed that each of these 98 credit unions had been examined, and not one examiner had discovered this breach of oversight,” Matz said. Hindsight being 20/20, NCUA has since issued a number of new reminders urging credit unions to be aware of third-party dealings. One important step is verifying whether the broker/dealer and the safekeeper are registered with the SEC or if their activities are regulated by a federal or state regulatory agency, according to Cherie Umbel, who provided information from the NCUA’s Office of Examination & Insurance. Credit unions should also do annual background checks on not only brokers, but the firms they work for to be sure of any enforcement actions. The National Association of Securities Dealers has a feature on its Web site, www.nasdr.com, to check broker credentials. A number of nationally-recognized agencies including www.moodys.com, www.standardandpoors.com/ratings and www.fitchinv.com, can be used to access financial data annual report for capital strength and liquidity, NCUA advised. SEC has reiterated the importance of doing stringent background checks on brokers. The agency was equally surprised that Bentley was able to sell the amount of investment products it did despite not being registered. “It’s important, it’s an extra layer of protection when you’re dealing with even registered dealers to be careful about the investment product,” said Robert Fusfield, regional trial counsel for the SEC’s Denver office and who was involved in the Bentley case. “Some of the losses credit unions suffered probably would have been minimized if they had checked [Bentley's background].” Fusfield told Credit Union Times the Bentley case was remarkable because of the amount of money that has been recovered through the court-appointed receiver. “So often, when there’s fraud, the horse is already out of the barn door,” Fusfield said. [email protected]

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