UNITED STATES OF AMERICA

BEFORE THE NATIONAL CREDIT UNION ADMINISTRATION BOARD

In the Matter of

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx                    Docket 99-INS-002 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxx

Insurance Claim

Espirito Santo Federal Credit Union

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 xxxxxxxxxx  group claim in the amount of xxxxxxxxxx.

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.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxx is a close family friend.  Hereinafter, the appellants will be  referred to as the xxxxxxxxx group. The xxxxxxxxx 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 xxxxxxxxxxx  On March 4, 1998 the Agent for the Liquidating Agent (ALA) determined the xxxxxxxxx group had xxxxxxxxxxx in insured shares, leaving xxxxxxxxxxx in uninsured shares.  The xxxxxxxxx group appealed the ALA’s determination on August 25, 1998.^[1]  The ALA again reviewed the xxxxxxxxx group accounts.  On October 27, 1998, the ALA paid an additional xxxxxxxxxxx to the xxxxxxxxx group.  This left xxxxxxxxxx in uninsured shares, the amount subject to appeal.

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

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 xxxxxxxxx group members.

Acct #           xxxxx                  xxxxxx             xxxxx                xxxxx                xxxxxxxxx        Total in

                                                                                                                                                                       Account

Total Shares   xxxxxxxxxx    xxxxxxxxxxx      xxxxxxx             xxxxxxxxxx       xxxxxxx            xxxxxxxxxxx

Under this analysis, xxxxxxxxxx of xxxxxxx 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.

Acct # and Type          xxxxx                  xxxxxx            xxxxx           xxxxx               xxxxxxxxxx

*NQ joint means non-qualifying joint.  These accounts are added to individual accounts pursuant

to Section 745.8(c) of the NCUA Regulations.

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

Name                                     Single Coverage                 Joint Coverage                     Total Coverage

Grand Total                                                                                               xxxxxxxxxxx

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 xxxxxxxxx group claim in the amount of xxxxxxxxxx and grants the xxxxxxxxx group appeal.  The Board directs the Agent for the Liquidating Agent to pay the xxxxxxxxx group claim in the amount of xxxxxxxxxx.  The Board further directs  the Agent for the Liquidating Agent to determine how much each of the xxxxxxxxx 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 24^th day of February, 1999 by the National Credit Union Administration.

                                                            ______________________

                                                            Becky Baker

                                                            Secretary of the Board