The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM DECISION AND ORDER
Claimants Baer & Baer, Efficient Management Service, Inc. and
137-41 South Fifth Avenue, Inc. ("the Baer Claimants"), move by
order to show cause pursuant to Rule 12 of the Rules for
Admiralty and Maritime Claims of the Eastern District of New
York for the summary release of three of the defendant bank
accounts from arrest and attachment. The Government opposes
this application, which opposition is supported by the
claimants Andrew Paulucci and Andrew Paulucci, Inc.
In addition, claimants Andrew Paulucci, Andrew Paulucci,
Inc., Aurelio Paulucci, David Minor, Julia Paulucci, Michael
Jacobs and Rosemary Jacobs ("the Paulucci Claimants"), move for
leave to file late notices of claim.
For the reasons that follow, the motion of the Baer Claimants
for summary release of the seized funds is denied, and the
motion of the Paulucci Claimants for leave to file late notices
of claim is granted.
United Independent Federal Credit Union ("United"), is a
federal credit union located in the State of New York. The
National Credit Union Administration ("NCUA"), has supervisory
authority over all of the nation's approximately 11,000
federally insured credit unions. The NCUA charters, insures,
examines the financial status of, and conserves or liquidates
such institutions when required. A "federal credit union" is a
"cooperative association" of seven or more natural persons,
organized "for the purpose of promoting thrift among its
members and creating a source of credit for provident or
productive purposes" (12 U.S.C. § 1752, 1753).
United became chartered as a federal credit union in 1936,
including in its "field of membership" persons who are members
of the United Independent Young Men's Benevolent Society, Inc.
of New York, New York, a Jewish fraternal organization, as well
as immediate family members. United presently has 433 members
and, as of June 30, 1990, its asset size was $1,244,000. United
is controlled by claimants Aaron Baer and Maurice Baer.
United shared office space with various business entities
controlled by Aaron Baer and Maurice Baer, including their
accounting firm Baer & Baer, Efficient Management Service,
Inc., 137-41 South Fifth Avenue, Inc. and 147 Franklin Realty
Corp. Together, the Baer brothers own more than 40% of the
shares on deposit at United and are on the Credit Committee.
The Government contends that from between June 1, 1989 and
June 30, 1990, Aaron Baer received $504,757 and Maurice Baer
received $195,500 in loans from United.
On October 18, 1990, counsel for claimant Andrew Paulucci
contacted the NCUA, advising them that Andrew Paulucci was a
member of United under the alias "Andrew Paul", as was Aurelio
Paulucci under the alias "Aurelio Paul". At a subsequent
meeting with the NCUA, Andrew Paulucci allegedly revealed the
details of several allegedly improper loans made by United in
Paulucci alleges that he was requested by Baer & Baer to
apply for membership in United by using the alias surname
"Paul", so as to create the appearance that he is within the
"field of membership". The Baers also suggested creating the
corporation Andrew Paulucci Inc. ("AP Inc."). The Baers
retained a 50% voting interest in the corporation and received
40% of the shares of stock in exchange for obtaining financing
for the Paulucci's. The Baers arranged for AP Inc. to acquire
$288,000 by virtue of a series of $36,000 loans from United.
With the knowledge of Baer & Baer, Paulucci allegedly executed
fraudulent loan applications to United on behalf of
himself, as Andrew Paul, and five other borrowers, namely,
Aurelio Paul, David Minor, Julia Paulucci, Rosemary Jacobs and
Michael Jacobs. The named payees of the loans did not receive
the proceeds of the loans, but rather through fraudulent
endorsements, the Baers allegedly obtained the amounts of the
loans on behalf of AP Inc. from United.
The total amount of funds received by AP Inc. was
approximately $288,000, which was allegedly subsequently
deposited in a bank account maintained by AP Inc. Immediately
thereafter, the Baers withdrew the money from the AP Inc.
account, and diverted it to various corporations in which they
had an interest, such as Baer & Baer, Efficient Management
Service, Inc., 137-41 South Fifth Avenue, Inc. and Skan
Teknologies Inc., according to the Government.
In sum, it is alleged that the Baers misused the United
credit union, in violation of the credit union by-laws, various
statutes and the applicable regulations. It is the position of
the Paulucci Claimants that the Baers used the AP Inc.
corporation as a front to divert monies to themselves.
Based upon these allegations, the NCUA issued an order of
conservatorship for United in November 1990 in an effort to
conserve United's assets and to protect the interests of the
credit union members and the National Credit Union Share
Insurance Fund. On November 29, 1990, United was placed into
conservatorship. The conservatorship is the subject of a
separate action pending before this Court ...