WASHINGTON - The government has moved to torpedo Lusitania Federal Credit Union's plans to switch to a thrift charter, sources said.
The National Credit Union Administration's March 1 decision, made during a closed board meeting, was expected. The regulator has taken a hard line against credit union conversions.
Besides, the Newark, N.J., institution didn't get the necessary agency approval of proxy statements informing members of the charter shift.
Agency officials would not discuss what happened during the closed-door meeting, and Lusitania officials said they had not yet received word from the agency.
Lusitania's next step is up in the air, according to Samuel Malizia, general partner of the Washington law firm Malizia, Spidi, Sloane & Fisch, which is representing Lusitania.
"It might be embarrassing for them to go back to their members," who have already voted for the conversion, to vote on it again, he added.
If the credit union does set another membership vote, Mr. Malizia said, he will try to get the Federal Deposit Insurance Corporation and Office of Thrift Supervision to issue approvals contingent upon the NCUA's consent.
Lusitania's journey toward a thrift charter began last August, when it applied for a mutual savings bank charter with the OTS. Almost immediately, teams of NCUA examiners swarmed over the $50 million-asset institution's books, an action that was widely seen as an intimidation effort by the regulator.
Lusitania was the first credit union to apply for a thrift charter. Late last year, Awane Credit Union, Peterborough, N.H., became the second.
The OTS is expected to make a decision on Lusitania's application today.
After the closed NCUA meeting Wednesday, the board of the credit union regulator met in open session to approve regulations governing charter changes. Under the new rules, a credit union must present a detailed conversion plan to NCUA and its members, and a majority of the credit union's members must approve it.
