A federal appeals court ruled against the NCUA last week in a bond insurance claim dispute stemming from the $72.5 million fraud case of the St. Paul Croatian Federal Credit Union.

The U.S. Court of Appeals for the Sixth Circuit on May 18 affirmed a lower court decision that CUMIS Insurance Society Inc. was not obligated to pay a $5 million insurance bond claim to the NCUA. In its 2-1 decision, the Cincinnati appeals court ruled the fidelity bond had been terminated well before it took effect in 2010 because a credit union director knew of an employee's dishonesty before 2010.

From 2000 to 2010, former St. Paul Croatian Federal Credit Union COO Anthony Raguz pocketed $1 million in bribes in exchange for issuing 1,000 fraudulent loans that amounted to more than $72 million. In April 2010, the NCUA conserved the Eastlake, Ohio credit union and liquidated it. After investigating and convicting about 20 people for crimes related to the massive fraudulent loan scheme, federal prosecutors said it was one of the largest credit union failures in U.S. history. The NCUA said it lost $171 million because of the credit union's collapse.

Continue Reading for Free

Register and gain access to:

  • Breaking credit union news and analysis, on-site and via our newsletters and custom alerts.
  • Weekly Shared Accounts podcast featuring exclusive interviews with industry leaders.
  • Educational webcasts, white papers, and ebooks from industry thought leaders.
  • Critical coverage of the commercial real estate and financial advisory markets on our other ALM sites, GlobeSt.com and ThinkAdvisor.com.

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.