Stockbroker Edwin F. Rachleff was under criminal investigation last year for suspicion of embezzling millions of dollars from a local credit union when he jumped from atop the Mohican Senior Apartments and took his life, according to a federal government report.The National Credit Union Administration's Office of Inspector General said the 82-year-old Rachleff - never mentioned by name, but only by his title of (investment) account manager - likely embezzled about $12 million from the New London Security Federal Credit Union that he served for decades. The criminal investigation by the U.S. Attorney's Office ended with Rachleff's death, according to a source familiar with the investigation.

The National Credit Union Administration's Office of Inspector General said the 82-year-old Rachleff - never mentioned by name, but only by his title of (investment) account manager - likely embezzled about $12 million from the New London Security Federal Credit Union that he served for decades. The criminal investigation by the U.S. Attorney's Office ended with Rachleff's death, according to a source familiar with the investigation. The report, which does not disclose where the missing money went, was completed last month and delivered to The Day as part of a federal Freedom of Information request.

The report, which does not disclose where the missing money went, was completed last month and delivered to The Day as part of a federal Freedom of Information request. The NCUA report is the first time any agency had officially acknowledged that Rachleff, a New London resident and longtime financial adviser and credit union board member, had been under criminal investigation in the days leading up to his suicide, which occurred on July 28, 2008, the same day that regulators closed the credit union and declared it insolvent.

The NCUA report is the first time any agency had officially acknowledged that Rachleff, a New London resident and longtime financial adviser and credit union board member, had been under criminal investigation in the days leading up to his suicide, which occurred on July 28, 2008, the same day that regulators closed the credit union and declared it insolvent. Red flags missed

Red flags missedThe 31-page report, titled "Material Loss Review of New London Security Federal Credit Union," faulted the financial institution's board of directors for ignoring repeated warnings that its lack of supervision could lead to trouble and its external auditors for not picking up on the suspected fraud. In addition, the NCUA's own regulatory oversight of the credit union was called inadequate.

The 31-page report, titled "Material Loss Review of New London Security Federal Credit Union," faulted the financial institution's board of directors for ignoring repeated warnings that its lack of supervision could lead to trouble and its external auditors for not picking up on the suspected fraud. In addition, the NCUA's own regulatory oversight of the credit union was called inadequate."We determined suspected fraud was the direct cause of New London's failure due to a misappropriation of credit union investment funds," according to the report by Inspector General William A. DeSarno. "The account manager made the investment purchase and sale decisions, executed investment transactions and submitted reports and recommendations to the board - with little or no oversight."

"We determined suspected fraud was the direct cause of New London's failure due to a misappropriation of credit union investment funds," according to the report by Inspector General William A. DeSarno. "The account manager made the investment purchase and sale decisions, executed investment transactions and submitted reports and recommendations to the board - with little or no oversight."The report said the suspected fraud occurred "for an undetermined period," though warning signs appeared in 2003, when the external auditor stopped getting adequate responses from the stock brokerage A.G. Edwards confirming the credit union investments.

The report said the suspected fraud occurred "for an undetermined period," though warning signs appeared in 2003, when the external auditor stopped getting adequate responses from the stock brokerage A.G. Edwards confirming the credit union investments."I'm shocked," said Peter Marcus, owner of Lee's Toy & Hobby in Groton and a former member of the credit union who got all his money back after the institution's failure. "It became like a fraternity, and everyone trusted everyone. ... Nobody ever thought this would happen."

"I'm shocked," said Peter Marcus, owner of Lee's Toy & Hobby in Groton and a former member of the credit union who got all his money back after the institution's failure. "It became like a fraternity, and everyone trusted everyone. ... Nobody ever thought this would happen."Earlier this year, the NCUA filed an $11.8 million claim against Rachleff's estate, saying the financial adviser had created fraudulent account statements. Rachleff's probate file, which contained his will, listed only $37,275 in assets.

Earlier this year, the NCUA filed an $11.8 million claim against Rachleff's estate, saying the financial adviser had created fraudulent account statements. Rachleff's probate file, which contained his will, listed only $37,275 in assets.The NCUA's insurance fund paid out about $9.6 million in losses that resulted from the failure of the local credit union, which had reported $12.7 million in assets. NCUA losses of less than $10 million are normally not investigated, but since losses accounted for 76 percent of the credit union's assets, the loss review was warranted, according to the report.

The NCUA's insurance fund paid out about $9.6 million in losses that resulted from the failure of the local credit union, which had reported $12.7 million in assets. NCUA losses of less than $10 million are normally not investigated, but since losses accounted for 76 percent of the credit union's assets, the loss review was warranted, according to the report.The investigation found that Rachleff had blank brokerage statements in his office, similar to those used in the suspected fraud, according to the report. Rachleff, who friends previously reported was not adept with computers, hand delivered manually typed investment statements to the credit union once a month, the report added.

The investigation found that Rachleff had blank brokerage statements in his office, similar to those used in the suspected fraud, according to the report. Rachleff, who friends previously reported was not adept with computers, hand delivered manually typed investment statements to the credit union once a month, the report added.The report said an NCUA examiner - the first new investigator the New London credit union had seen in four years - discovered during a routine annual audit beginning in June 2008 that Rachleff "could not answer any questions about the investments" in the institution's $12 million portfolio.

The report said an NCUA examiner - the first new investigator the New London credit union had seen in four years - discovered during a routine annual audit beginning in June 2008 that Rachleff "could not answer any questions about the investments" in the institution's $12 million portfolio.A closer look

A closer look"The printing on the credit union's investment statement looked odd," according to the report, and investment activity had not been updated for several months.

"The printing on the credit union's investment statement looked odd," according to the report, and investment activity had not been updated for several months.The report said examiners then looked closely at brokerage statements and found investments listed there that the credit union did not actually own. The officials also found that investment trade tickets and brokerage statements "appeared to have been altered," according to the report.

The report said examiners then looked closely at brokerage statements and found investments listed there that the credit union did not actually own. The officials also found that investment trade tickets and brokerage statements "appeared to have been altered," according to the report.The report said examiners visited Rachleff's brokerage office - not identified, but known to be Wachovia Securities in Mystic, which bought out A.G. Edwards shortly before the credit union's failure - and found a deferred-compensation account that held about $55,000 in investments, but no other funds in the name of New London Security Federal Credit Union. They later determined that Rachleff had used an account for credit union transactions that belonged to Elmore Shoe Co., "which was owned by the family of the account manager's wife," according to the report.

The report said examiners visited Rachleff's brokerage office - not identified, but known to be Wachovia Securities in Mystic, which bought out A.G. Edwards shortly before the credit union's failure - and found a deferred-compensation account that held about $55,000 in investments, but no other funds in the name of New London Security Federal Credit Union. They later determined that Rachleff had used an account for credit union transactions that belonged to Elmore Shoe Co., "which was owned by the family of the account manager's wife," according to the report. A phone call to Jim Glasser, a New Haven attorney who represents Rachleff's widow Naomi, went unreturned Monday.

A phone call to Jim Glasser, a New Haven attorney who represents Rachleff's widow Naomi, went unreturned Monday.The report said Wachovia's senior regulatory counsel confronted Rachleff about the credit union's brokerage statements, but the financial adviser denied any misdeeds. It is unclear how soon after this confrontation that Rachleff ended his life because the NCUA did not respond to a series of questions about the case submitted Monday afternoon.

The report said Wachovia's senior regulatory counsel confronted Rachleff about the credit union's brokerage statements, but the financial adviser denied any misdeeds. It is unclear how soon after this confrontation that Rachleff ended his life because the NCUA did not respond to a series of questions about the case submitted Monday afternoon.The inspector general's report blamed the New London Security Federal Credit Union's board of directors, supervisory committee and manager for failing to adequately double check the legitimacy of investment statements that Rachleff provided.

The inspector general's report blamed the New London Security Federal Credit Union's board of directors, supervisory committee and manager for failing to adequately double check the legitimacy of investment statements that Rachleff provided. "The credit union's Supervisory Committee was inactive for more than four years," according to the report. What's more, the NCUA had repeatedly recommended that quarterly reviews of credit union operations be contracted out in lieu of an active supervisory group. "The board repeatedly promised to contract out quarterly reviews; however, this never occurred," the report stated.

"The credit union's Supervisory Committee was inactive for more than four years," according to the report. What's more, the NCUA had repeatedly recommended that quarterly reviews of credit union operations be contracted out in lieu of an active supervisory group. "The board repeatedly promised to contract out quarterly reviews; however, this never occurred," the report stated.The board also failed to formally adopt written investment policies, the report said.

The board also failed to formally adopt written investment policies, the report said. Board was 'lax'

Board was 'lax'"New London's lax internal control environment created an environment susceptible to fraud," it concluded. "New London management repeatedly failed to take timely corrective actions on NCUA (recommendations)."

"New London's lax internal control environment created an environment susceptible to fraud," it concluded. "New London management repeatedly failed to take timely corrective actions on NCUA (recommendations)."The board consisted of Herb Linder, chair; Marty Yavener, vice chair; Hinda Kimmel, treasurer, and members Reuben "Rip" Levin and Martin Lazarus. The credit union manager at the time of its closure was Janice E. Brady; for years previously, it had been Mary Lou Richards.

The board consisted of Herb Linder, chair; Marty Yavener, vice chair; Hinda Kimmel, treasurer, and members Reuben "Rip" Levin and Martin Lazarus. The credit union manager at the time of its closure was Janice E. Brady; for years previously, it had been Mary Lou Richards.Members of the board did not return phone calls or, in the case of Kimmel and Lazarus, declined to comment about the NCUA report. Brady could not be located, and Richards said in a phone interview that she simply believed the statements Rachleff presented her.

Members of the board did not return phone calls or, in the case of Kimmel and Lazarus, declined to comment about the NCUA report. Brady could not be located, and Richards said in a phone interview that she simply believed the statements Rachleff presented her.The report also said the credit union's attorney reviewed a "safekeeping agreement" that would have allowed a third party to review Rachleff's investments. But the NCUA was never able to locate a written document "which could have shown that the credit union's interests were protected," the report stated.

The report also said the credit union's attorney reviewed a "safekeeping agreement" that would have allowed a third party to review Rachleff's investments. But the NCUA was never able to locate a written document "which could have shown that the credit union's interests were protected," the report stated.In addition, according to the report, NCUA examiners should be faulted because they "failed to elevate these repeated issues for stronger supervisory actions." Examiners should have seen red flags, the report said, because of the credit union's heavy reliance on investments, which accounted for about 94 percent of its reported assets.

In addition, according to the report, NCUA examiners should be faulted because they "failed to elevate these repeated issues for stronger supervisory actions." Examiners should have seen red flags, the report said, because of the credit union's heavy reliance on investments, which accounted for about 94 percent of its reported assets."The credit union operated primarily as an investment club," according to the report.

"The credit union operated primarily as an investment club," according to the report.