CLEVELAND, Ohio–The U.S. Court of Appeals for the Sixth Circuit has ruled in favor of Cumis Insurance Society and against NCUA over a $5-million claim related to what is the largest natural-person credit union failure in history.
NCUA had filed the claim with Cumis related to a fidelity bond issued to St. Paul Croatian FCU in 2010 which was to provide $5 million in coverage for employee or director dishonesty. The agency placed St. Paul Croatian in conservatorship in 2010 after discovering an historic embezzlement more than a decade in the making by Anthony Raguz, the CU’s former COO, had been part of an illegal loan scheme that involved $72.5 million in loans. The CU’s failure eventually cost the National Credit Union Share Insurance fund approximately $170 million. In all, more than 20 people were convicted of crimes as a result.
After NCUA filed its claim with Cumis, the company responded by claiming the coverage for Raguz had been terminated prior to the 2010 bond, because a former board member, Robert Calevich, had known in February of that year that Raguz had committed a number of dishonest acts and had not disclosed the information.
The judge ruled in Cumis’ favor, saying that Calevich knew the zero delinquency rate being reported by Raguz to the board was wrong.