Rachleff fraud case finally comes to end
New London — Federal regulators have settled a lawsuit that resulted from the closure of a small downtown credit union in 2008 when an audit discovered millions of dollars in assets had disappeared.
Though a National Credit Union Administration spokesman said Wednesday that "nothing is final," online court records indicate the NCUA's suit against Wells Fargo Advisors "has been settled in full," awaiting only the expected Dec. 18 official closing of the case involving the insolvent New London Security Federal Credit Union.
No indication of the amount of the settlement could be found, and agreements of this sort often come with stipulations that the amount not be revealed in any case, said NCUA spokesman John Fairbanks.
The NCUA said it lost nearly $10 million.
Edwin F. Rachleff, a respected financial adviser for the New London Security Federal Credit Union, concealed the embezzlement for more than two decades, according to an investigation by federal regulators released in 2009.
That was about a year after Rachleff committed suicide by jumping from the top of the Mohican Hotel on the day his scheme unraveled.
About $570,000 in losses was never paid out because account holders at the time were insured only up to the $100,000 insurance limit then in effect. The limit has since been raised to $250,000.
"Who knows if I'm going to see any of my money back?" said Mark Fetcher, now a Florida resident and one of the credit union's account holders who lost more than the $100,000 limit.
Fetcher said he was updated this week by an NCUA official who told him the settlement amount will not be disclosed but should be complete by the end of the year.
He said lawyers will likely get first crack at any money from the settlement and blamed Wells Fargo for fighting the case in court for more than six years.
"They've been fighting this constantly since day one," he said. "Nothing like this ever happened before. Wells Fargo did not want to be the one to set a precedent."
George Lazerow of Waterford, whose wife, Joan, had a large account with the credit union, blamed the government for lack of regulation.
"They never did a proper audit on the credit union," Lazerow said. "The conniver was taking all that money."
Wells Fargo employed Rachleff for only a few months but was sued as the successor company to the 83-year-old financial adviser's previous brokerage houses, Wachovia Securities, A.G. Edwards and Sons Inc. and Moseley, Hallgarten, Estabrook & Weeden Inc.
According to an updated NCUA complaint filed last year, Rachleff's fraud lasted from February 1988 to July 2008.
At the time, Rachleff's fraudulent account statements indicated the credit union had $11.8 million in an account that didn't exist.
Instead, the money had previously been transferred to an account under the name of Elmore Shoe Co., a defunct business once owned by Rachleff's wife's family.
The complaint said Rachleff forged the signatures of Martin Charlop, Samuel Rubenstein, Richard Rubenstein and Jeffrey Rubinstein to open the shoe-company account.
He then took "significant withdrawals that were not on behalf of the credit union," the suit said.
The suit added that "it is possible that Mr. Rachleff was engaged in a similar fraud while at Moseley," a brokerage where he worked from 1979 to 1988.
Rachleff's activities were uncovered after a routine audit by the NCUA determined the credit union had no assets.
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