CLEVELAND, Ohio (10/16/13)--A federal judge in Cleveland has dismissed a lawsuit brought by a church claiming it was owed deposit insurance payments on $1.5 million it lost when the National Credit Union Administration placed St. Paul Croatian FCU into conservatorship in 2010.
The church, Holy Love Ministries of North Ridgeville, had two accounts totaling $1.7 million in the East Lake, Ohio-based credit union when it was placed into involuntary liquidation on April 20, 2010.
The two accounts, an operating account and a building account, were set up by Joseph Plavac, an officer of the church. Plavac was also a member of the credit union's board and a former CEO of St. Paul, the opinion document said. The two accounts had multiple members designated as signers on each account, and the church alleged it had structured the accounts so each individual would be entitled to $250,000.
Although the church collected $250,000 in claims, its suit maintained that NCUA's Asset Management and Assistance Center, which acted as liquidating agent, should provide $250,000 per signer of the accounts, or at least provide $250,000 for the second account.
In the memorandum opinion filed Friday in the U.S. District Court for the Northern District of Ohio, Eastern Division, Judge Donald C. Nugent wrote that "under the Administrative Procedures Act, the NCUA Board's final determination as to insurance coverage on Holy Love's accounts was supported by substantial evidence and was not arbitrary, capricious, an abuse of discretion, or contrary to law."
He noted that "the accounts of a corporation, partnership, or unincorporated association engaged in any independent activity are insured up to $250,000 in the aggregate" and that the account records of the insured credit union "shall be conclusive as to the existence of any relationship pursuant to which funds in the account are deposited and on which a claim for insurance coverage is founded."
He noted that "St. Paul's records reflect Holy Love's accounts were accounts of a corporation, partnership, or unincorporated association engaged in an independent activity.
The liquidating agent and the NCUA Board relied on the records of St. Paul at the time of liquidation in determining Holy Love's insurance coverage." Holy Love's remaining claims are beyond the scope of the court and are "dismissed without prejudice," he wrote.
The credit union's CEO, Anthony Raguz, is serving a 14-year prison term for accepting bribes, kickbacks and gifts in exchange for loans. He allegedly issued more than 1,000 fraudulent loans totaling more than $70 million to about 300 accountholders and accepted more than $1 million in bribes (News Now Nov. 27). Nearly two dozen people have been arrested and several have received prison terms related to the frauds.
The collapse of St. Paul Croatian FCU was one of the most costly in credit union history, costing the National Credit Union Share Insurance Fund more than $170 million.