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NCUA seeks 72.5M in payments from CUMIS
ALEXANDRIA, Va. (8/26/11)--The National Credit Union Administration (NCUA) has enlisted the aid of federal courts as it seeks to recoup $72.5 million in fidelity bonds from CUMIS Insurance Society Inc. The NCUA’s action against CUMIS was filed in the U.S. District Court for the Northern District of Ohio on Aug. 18. CUMIS provides employee fidelity insurance to credit unions, and is also a part of CUNA Mutual Group. The insurer provided insurance to the credit union in the form of a fidelity bond. The NCUA filed a $72.5 million loss claim with the insurer last October after St. Paul Croatian FCU, which held $238.8 million in funds from 5,400 members, was placed into conservatorship and ultimately liquidated. The former-COO of the now defunct credit union, Anthony Raguz, has been charged with issuing more than 1,000 fraudulent loans totaling more than $70 million to about 300 account holders from 2000 to April 2010. Several members also allegedly committed financial fraud in the case. The NCUA's Office of the Inspector General reported last year that fraudulent loans pushed the credit union into liquidation, and the agency said that this liquidation cost the National Credit Union Share Insurance Fund around $170 million in losses. While CUMIS acknowledged that the NCUA filed a proof of loss claim late last year, the insurer later “attempted to rescind the bond based solely on claimed ‘. . . material misrepresentations and concealment of material facts made [by former credit union COO Anthony Raguz] at the time the credit union [i.e. St. Paul] obtained and renewed the fidelity bond.” CUMIS has denied payment to the NCUA due to this recission. However, the agency in its complaint said that it “timely asserted the claims under the Cumis bond” and noted that the insurer is obligated to pay for losses “resulting directly from dishonest acts committed by an ‘employee’ or ‘director’” of an insured firm under Ohio law. CUNA Mutual Group spokesman Phil Tschudy told News Now that "CUNA Mutual's fidelity bond has a $5 million coverage limit. So the amount of money in dispute is a fraction, less than 7%, of the $72.5 million figure included in the proof of loss claim." However, the NCUA in its complaint alleged that the CUMIS bond must be paid off under Ohio law.

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