Decision and Order on Appeal Espirito Santo Federal Credit Union

UNITED STATES OF AMERICA

BEFORE THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

In the Matter of [redacted]

Insurance Claim
Espirito Santo Federal Credit Union

Docket 99-INS-002

Decision and Order on Appeal

Decision

This matter comes before the National Credit Union Administration Board (Board) pursuant to 12 CFR 745.202 as an appeal of the determination by the Agent for the Liquidating Agent of Espirito Santo Federal Credit Union denying the [redacted] group claim in the amount of [redacted].

Background

Espirito Santo Federal Credit Union, located in Fall River, Massachusetts, was an associational credit union, chartered to serve members of the Espirito Santo Roman Catholic Parish in Fall River. It was placed into involuntary liquidation due to insolvency, effective September 5, 1997. The liquidation was due to extensive embezzlement involving credit union officials.

[redacted] is a close family friend. Hereinafter, the appellants will be referred to as the [redacted] group. The [redacted] group had a total of nine accounts at the FCU in one or more of their names. At the date of liquidation, the total balance in all nine accounts was [redacted] On March 4, 1998 the Agent for the Liquidating Agent (ALA) determined the [redacted] group had [redacted] in insured shares, leaving [redacted] in uninsured shares. The [redacted] group appealed the ALA’s determination on August 25, 1998.¹ The ALA again reviewed the [redacted] group accounts. On October 27, 1998, the ALA paid an additional [redacted] to the [redacted] group. This left [redacted] in uninsured shares, the amount subject to appeal.

The following chart sets out information on each of the [redacted] group accounts as reflected in the FCU’s records.

[redacted]

The ALA assumed equal interest of all parties to each account established in more than one name. The ALA insured all accounts in more than one name as non-qualifying joint accounts. Funds in such accounts are treated as owned by the named persons as individuals, added to any other accounts individually owned by such person, and insured up to $100,000 in the aggregate. (See 745.8(c) of the NCUA Regulations.) The two accounts in one name only were insured as single ownership accounts pursuant to Section 745.3 of the NCUA Regulations. Hence, all funds were insured as though they were held in single ownership accounts. The following chart shows the ALA’s allocation of shares to each of the [redacted] group members.

[redacted]

Under this analysis, [redacted] of [redacted] funds are uninsured.

Using the same account balance allocation, the Board determined that there were joint ownership accounts, non-qualifying joint accounts and single ownership accounts, as represented below.

By applying this analysis, the total of insured shares for each individual is as follows:

[redacted]

Grand Total

The Board has determined that the insurance payout should be made in accordance with the above analysis.

Order

Based on the above, it is ORDERED as follows:

The Board reverses the Agent for the Liquidating Agent’s decision to deny the [redacted] group claim in the amount of [redacted] and grants the [redacted] group appeal. The Board directs the Agent for the Liquidating Agent to pay the [redacted] group claim in the amount of [redacted]. The Board further directs the Agent for the Liquidating Agent to determine how much each of the [redacted] members should be paid based on the amount of funds each individual has already received and the total of insured shares for each individual noted in this decision.

So ORDERED this 24th day of February, 1999 by the National Credit Union Administration.

Becky Baker
Secretary of the Board

¹ Section 745.201(c) of the NCUA Regulations (12 CFR 745.201(c)) allows a claimant 30 days to request reconsideration from the ALA. Section 745.202(a) of the Regulations requires that an appeal be filed within 60 days after issuance of an initial determination or a determination on a request for reconsideration. Although more time elapsed in this case, the appeal was accepted due to miscommunication between the claimant and the ALA.