NEW LONDON–Ten years after the shuttering of a credit union here and the suicide of a long-time investment broker who had committed embezzlement, people in this community continue to have questions about just what took place.
In late July of 2008, NCUA arrived at New London Security FCU to shut down the CU, only to discover it appeared someone had broken into the credit union overnight. It would eventually be discovered that the embezzlement had gone on for between 20 and 40 years.
Now, in an extensive profile published by TheDay.com, additional details around what took place are being revealed.
“On that day, (NCUA), which already had called in the FBI to investigate, declared the institution insolvent, leaving dozens of investors to wonder what had happened and whether they would ever get back their money,” TheDay.com reported.
Once inside the credit union, investigators found the deadbolt disengaged, and the safe was unlocked, as was a normally secure file cabinet that credit union manager Janice Brady testified had been closed the night before, TheDay.com reported.
‘Beloved’ Broker Jumps From Building
A few hours later, Edwin F. Rachleff, a longtime investment adviser at the credit union who was described as a “beloved stock broker” for the now-defunct A.G. Edwards in New London and Waterford, would be found dead after jumping from the 11th floor of the Mohican Senior Apartments, TheDay.com reported.
A year later, NCUA concluded Rachleff as the likely sole perpetrator of an embezzlement scheme that experts predict lasted 20 to 40 years and cost insurers and local depositors about $11.7 million. In New London, the scheme has since been described as a "mini-Madoff.”
One of the big questions that remains is what became of the money. Investigators said Rachleff enjoyed some finer things and travel, but did not lead a lifestyle that would account for all of the missing funds.
In terms of the scheme itself, what is known is that “Rachleff apparently intercepted attempts to verify the accounts that the credit union had been told were at his brokerage house, A.G. Edwards, and sent back verifications that were faked and sometimes unsigned, yet no one flagged the issue…In the last five years of the scam, the credit union did not send a single check to its investment firm. And Rachleff was not taking any commissions for his purported credit union investment work, apparently because he never actually completed the transactions he faked, but the pro bono work apparently raised no concerns.”
Board Was Urged to Limit Assets
TheDay.com further reported that the “credit union's board of directors, apparently at the urging of Rachleff, had been careful to keep total assets below $12 million to fall under the threshold for more aggressive regulation by NCUA.
NCUA eventually filed suit against several members of the board, along with the CU’s auditor, but eventually dropped legal action against those parties. NCUA itself also came under heat for having allowed the scam to last for so long.
In all, members holding 13 accounts whose deposits were in excess of the $100,000 insurance limit at the time lost approximately $375,000.
The NCUSIF paid out $9.9 million in insurance compensation for their losses, based on the money that had been recorded by New London Security.
In the interview, one former member called the long-time embezzlement “incomprehensible.”
For the full story, go here.