The late Edwin F. Rachleff's purported theft of nearly $12 million from a now-shuttered New London financial institution has led the federal agency that regulates credit unions to sue a major brokerage firm in hopes of recouping the money.The National Credit Union Administration Board, which was forced to close the New London Security Federal Credit Union two years ago after discovering what it called a "massive fraud" it blamed on Rachleff, filed a lawsuit late last week in U.S. District Court in Bridgeport against Wells Fargo Advisors LLC, a network of 16,000 financial experts nationwide that includes offices in Mystic, Old Lyme and Old Saybrook.

The National Credit Union Administration Board, which was forced to close the New London Security Federal Credit Union two years ago after discovering what it called a "massive fraud" it blamed on Rachleff, filed a lawsuit late last week in U.S. District Court in Bridgeport against Wells Fargo Advisors LLC, a network of 16,000 financial experts nationwide that includes offices in Mystic, Old Lyme and Old Saybrook.The suit claims that Wells Fargo, successor to the brokerage houses A.G. Edwards and Wachovia Securities, for which Rachleff worked, was negligent in supervising the longtime stockbroker, who served for decades as investment adviser for the New London credit union. Rachleff, a New London resident, converted funds from the credit union to an account under the name of the Elmore Shoe Co., a defunct city business once owned by his wife's family, according to the suit.

The suit claims that Wells Fargo, successor to the brokerage houses A.G. Edwards and Wachovia Securities, for which Rachleff worked, was negligent in supervising the longtime stockbroker, who served for decades as investment adviser for the New London credit union. Rachleff, a New London resident, converted funds from the credit union to an account under the name of the Elmore Shoe Co., a defunct city business once owned by his wife's family, according to the suit."Mr. Rachleff had complete control over (the) account ... and performed transactions on the account, including taking significant withdrawals that were not on behalf of the credit union," the suit said.

"Mr. Rachleff had complete control over (the) account ... and performed transactions on the account, including taking significant withdrawals that were not on behalf of the credit union," the suit said.Wells Fargo, which had record profits of $12.3 billion last year, declined to comment on the lawsuit Thursday.

Wells Fargo, which had record profits of $12.3 billion last year, declined to comment on the lawsuit Thursday.The suit, filed by Robert E. Kaelin and Ka Fei Wong of the Murtha Cullina law firm in Hartford, did not specify what Rachleff may have done with the money. Kaelin said Thursday that he had no comment on the case, per NCUA policy.

The suit, filed by Robert E. Kaelin and Ka Fei Wong of the Murtha Cullina law firm in Hartford, did not specify what Rachleff may have done with the money. Kaelin said Thursday that he had no comment on the case, per NCUA policy.Rachleff, who committed suicide at the age of 82 on the same day regulators shut down the credit union and declared it insolvent, had "used brokerage statements with A.G. Edwards letterhead at his disposal to fabricate falsified investment account statements that he then provided to the credit union on behalf of A.G. Edwards," according to the suit.

Rachleff, who committed suicide at the age of 82 on the same day regulators shut down the credit union and declared it insolvent, had "used brokerage statements with A.G. Edwards letterhead at his disposal to fabricate falsified investment account statements that he then provided to the credit union on behalf of A.G. Edwards," according to the suit. The suit states that the brokerage house "knew or should have known" that Rachleff had access to the blank statements and that such access gave the financial adviser "facilities and the opportunity to create a fraudulent account."

The suit states that the brokerage house "knew or should have known" that Rachleff had access to the blank statements and that such access gave the financial adviser "facilities and the opportunity to create a fraudulent account."The suit said Rachleff, from 1988 to 2008, provided the credit union with trade confirmations on transactions that didn't actually occur. At the same time, according to the suit, Rachleff accepted money from the credit union that he subsequently put into the account only he controlled.

The suit said Rachleff, from 1988 to 2008, provided the credit union with trade confirmations on transactions that didn't actually occur. At the same time, according to the suit, Rachleff accepted money from the credit union that he subsequently put into the account only he controlled.By the time the scheme started to unravel during a routine examination two years ago by federal regulators, $11.8 million in funds that Rachleff's statements indicated belonged to the credit union had disappeared, the suit said. The credit-union regulator eventually had to pay out $9.7 million in insurance funds to cover the losses.

By the time the scheme started to unravel during a routine examination two years ago by federal regulators, $11.8 million in funds that Rachleff's statements indicated belonged to the credit union had disappeared, the suit said. The credit-union regulator eventually had to pay out $9.7 million in insurance funds to cover the losses.The suit said Rachleff indicated in March 1988 that he was opening an account on behalf of the New London credit union, and in April of the same year gave the balance on its investments at A.G. Edwards as about $4.8 million. Between that time and July 2003, according to the suit, the credit union gave Rachleff checks totaling nearly $1.8 million to add to its investments.

The suit said Rachleff indicated in March 1988 that he was opening an account on behalf of the New London credit union, and in April of the same year gave the balance on its investments at A.G. Edwards as about $4.8 million. Between that time and July 2003, according to the suit, the credit union gave Rachleff checks totaling nearly $1.8 million to add to its investments.In early spring 2005, A.G. Edwards told the credit union that its account number was being changed because of a technology upgrade, the suit said.

In early spring 2005, A.G. Edwards told the credit union that its account number was being changed because of a technology upgrade, the suit said."At no time prior to July 2008 did defendant Wells Fargo, formerly Wachovia and formerly A.G. Edwards, notify the credit union that (the) account ... did not belong to the credit union," according to the suit.

"At no time prior to July 2008 did defendant Wells Fargo, formerly Wachovia and formerly A.G. Edwards, notify the credit union that (the) account ... did not belong to the credit union," according to the suit.In addition to negligent supervision, the suit charges Wells Fargo with breach of implied contract, negligent misrepresentation, conversion and one other count. It asks for no specific monetary damages but requests a jury trial to determine the amount.

In addition to negligent supervision, the suit charges Wells Fargo with breach of implied contract, negligent misrepresentation, conversion and one other count. It asks for no specific monetary damages but requests a jury trial to determine the amount.Late last year, the National Credit Union Administration said it was discussing a possible settlement with Wells Fargo concerning the fraud. The lawsuit's filing indicates those discussions were not successful.

Late last year, the National Credit Union Administration said it was discussing a possible settlement with Wells Fargo concerning the fraud. The lawsuit's filing indicates those discussions were not successful.The NCUA also said at the time that it was looking to settle with the credit union's outside auditing firm, which was not identified, though the New London firm of Beller Shepatin & Co. had done the financial institution's books for years before the death of one of its principals. No suit filed in Connecticut involving an outside auditing firm and the NCUA could be located in a search.

The NCUA also said at the time that it was looking to settle with the credit union's outside auditing firm, which was not identified, though the New London firm of Beller Shepatin & Co. had done the financial institution's books for years before the death of one of its principals. No suit filed in Connecticut involving an outside auditing firm and the NCUA could be located in a search.In addition to the NCUA claim, Wells Fargo is facing a $7.5 million fraud complaint by one of Rachleff's former clients. That case is still pending, according to information on the Web site for the Financial Industry Regulatory Authority.

In addition to the NCUA claim, Wells Fargo is facing a $7.5 million fraud complaint by one of Rachleff's former clients. That case is still pending, according to information on the Web site for the Financial Industry Regulatory Authority.The NCUA also has filed a claim against Rachleff's estate, which records indicate had less than $40,000 in investments.

The NCUA also has filed a claim against Rachleff's estate, which records indicate had less than $40,000 in investments.l.howard@theday.com

l.howard@theday.com