LYNCHBURG, Va. (CN) - A 90-year-old woman claims in court that her life savings were stolen by the scheming wife of a trusted nephew, the manager of the credit union she entrusted with her money.
In a complaint filed Monday in the Lynchburg, Va. Federal Court, Ruby Van Scoten says over the course of her life she saved $230,000 that she deposited in 2002 into a savings account at the Lynrocten Federal Credit Union.
Shortly thereafter she granted her nephew, Arthur Newcomb, partial access to her account, considering the withdrawals he made from it zero-interest loans.
But Van Scoten says what she didn't know at the time was that Newcomb's wife, Linda Sue Newcomb, the manager of Lynrocten, was engaged in a large-scale, bogus loan scheme at the credit union.
As described in the complaint, Linda Newcomb created fictitious loans, which investigators later found made up 88 percent of all loan activity at the credit union.
The National Credit Union Administration discovered the fraudulent loans in April 2013, and declared the Lynrocten insolvent a month later. Total losses stemming from the insolvency and later liquidation of the credit union were $11 million.
In July 2015, Linda Newcomb was sentenced to 10 years in prison. Investigators said Arthur Newcomb knew nothing of the scheme when it was going on and was never charged.
After the investigation ended, Van Scoten filed an insurance claim with the National Credit Union Administration, in hopes of recovering her devastating loss.
But Van Scoten says despite her willingness to testify about the fraud Linda Newcomb perpetrated at Lynrocten, her fully cooperating with authorities, and her supplying a detailed log of all activity that occurred within her savings account over the course of several years, she soon found herself mired in a new dilemma.
According to the complaint, the defendant NCUA sent her letter saying "the balance [in her account] was $227,574.01, the exact amount [her] own separate records show that she deposited of her own money."
Yet, Van Scoten says the letter also informed her that Arthur Newcomb, the account co-owner, "owned other accounts having a negative balance of $249,256.09, was liable for an additional $6,202.82 and pledged [her life saving's account] as collateral."
NCUA claimed a right of offset, or a collection of Newcomb's debts out of the partially shared account with his aunt, but Van Scoten argued that the debt assigned to her nephew was due to Linda Newcomb's fraudulent overdrawing activities.
"The NCUA is thus collecting a debt of the fraudster's from Ruby Van Scoten, the 90 year old victim of the fraud," the complaint states.
Van Scoten also claims NCUA and by proxy, the National Credit Union Administration Board whom she also named in Monday's complaint, didn't provide any information in the letter explaining her right to appeal the credit union's decision.
Moreover, Van Scoten claims that the credit union did not correctly structure her account, falsely granting Arthur Newcomb joint ownership rights instead of assigning him as "payable on death" only without any ownership rights while Van Scoten was alive, as per her initial request.
The false representation, Van Scoten claims, ultimately "gave the Lynrocten Federal Credit Union's manager's husband, a current ownership interest in Ruby Van Scoten's life savings against her wishes."
Calling the administration's decision "arbitrary and capricious," Van Scoten also said "Arthur Newcomb's debts are separate and according "to courts nationwide since the 19th century, rights of offset are limited by equitable principles and a separate debt cannot be offset by a joint debt."
Van Scoten is asking the court to overturn the admininstration's decision and to award her insurance funds stemming from the fraud case without applying them to the offset.
A representative for admininstration declined to comment on the allegations.
Van Scoten is represented by Erin Ashwell of Woods Rogers PLC in Roanoke, Virginia, and Ray Ferris, of Ferris & Eakin PC in Roanoke.
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