Drinks, drugs and strip clubs at the center of NCUA internal report

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Two former employees of the National Credit Union Administration are alleged to have taken drugs, drank alcohol and visited strip clubs more than half a dozen times while on the clock, according to a report from NCUA's Office of the Inspector General.

The report, which Credit Union Journal obtained Friday through a Freedom of Information Act request, alleges former NCUA General Counsel Mike McKenna and his former deputy, Lara Daly-Sims, drank alcohol and visited strip clubs at least seven times between Feb. 2017 and Dec. 2018. The pair’s visits lasted an average of three to four hours.

The report is the second high-profile internal scandal to hit the agency in just over a year. Early last year, board member Mark McWatters came under fire after an IG report outlined “extravagant” spending by the former chairman and his chief of staff. The need for reforms in the wake of that scandal was a focal point of NCUA Chairman Rodney Hood’s confirmation hearing last year.

According to the new report, Daly-Sims said she was uncomfortable with what was going on but conceded because she believed McKenna was “helping her get the NCUA general counsel job” following his retirement. She said she continued to join him on those trips because she felt she was unable to decline his invitations.

“[Expletive] Mike keeps taking me out on these excursions and I don't like it, but I feel like I have to go,” she said to Frank Kressman, at the time the agency’s associate general counsel.

Accusations of sexual harassment in the credit union industry have bubbled to the surface before. Last year, Rachel Pross, chief risk officer at Maps Credit Union in Salem, Ore., wrote a post on LinkedIn outlining inappropriate behavior at an industry conference by male attendees.

McKenna claimed Daly-Sims had previously said she had never been to a strip club and wanted to go.

Kressman was named acting general counsel following McKenna’s retirement last fall.

When Daly-Sims voiced her concerns about their trips being discovered, the report said, McKenna told her to tell the agency’s inspector general they were off-site at a planning session.

The report says McKenna claimed he did not remember going to the gentleman’s club during the work day, though in a later response to a question from NCUA’s reporting agent he said it was “possible that he returned to the gentleman’s club to retrieve his credit card,” according to the 12-page report.

Both Daly-Sims and McKenna also consumed edible marijuana while on the clock during a work-related trip in New York City, according to the report. McKenna said in his interview with the IG that prior to that he had not consumed marijuana during the work day since he joined the army in 1985.

The report goes on to say McKenna pushed the idea of placing bets surrounding the NCAA March Madness basketball tournament, though in his interview with the IG’s office McKenna said these were jokes, no money was exchanged and none of the bets happened.

The NCUA investigation also found that between April 2017 and November 2019 Daly-Sims worked 374 fewer hours than she reported on her timesheets. The agency said that is equivalent to $47,000 in additional salary she should not have received.

McKenna retired from the NCUA on November 19, 2019, one day after the agency opened its investigation. He was reportedly informed during an interview that he could be subject to a drug test and offered to “pee in a cup right now."

Daly-Sims resigned on Jan. 10, 2020 while on administrative leave and declined to address the discrepancies concerning her timesheet, according to the report. She is currently a partner at Chapman and Cutler LLP in Washington, according to her LinkedIn profile.

The U.S. Attorney's Office for the Eastern District subsequently declined to prosecute either McKenna or Daly-Sims.

‘Profoundly disappointed’

In a statement released before the report was made public, NCUA Chairman Rodney Hood said he was “surprised and disappointed” by the behaviors described in the report, which he called “unacceptable and do not represent the values of this agency.”

The Credit Union National Association echoed those sentiments.

“To say we are profoundly disappointed is an understatement,” President and CEO Jim Nussle said in a statement.

McKenna and Daly-Sims’s actions took place during Mark McWatters’ chairmanship of the agency, and in a later tweet, Nussle said “none of the actions detailed in the NCUA OIG report have a place in any work environment, let alone by senior management within a government agency. It’s stunning that this went on for so long, but Rodney Hood’s efforts to right the ship are critical.”

The National Association of Federally-Insured Credit Unions said the report is proof of the need for further reforms at the agency.

"Credit unions have long been pushing for change at the NCUA – transparency, accountability, and prudent stewardship of the budget," NAFCU President and CEO Berger said in a statement.

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Workplace culture Sexual harassment Sexual harassment in the professional workplace Diversity and equality NCUA