ST. HELENS, Ore. NCUA told dissident members of St. Helens Community FCU in the days after last September’s failed bid to recall the majority of the board that it would not intervene in the dispute because it did not appear to affect the safety and soundness of the $160-million credit union.
In an e-mail sent to the lead dissident, Steven Knebel, last Sept. 7, three days after the controversial special board meeting to oust five of the seven directors, NCUA’s Region Five Director Elizabeth Whitehead said NCUA has the discretion to take administrative action when a credit union does not comply with its bylaws as Knebel and his allies alleged. “[But] our investigation of this matter did not reveal there is a material safety and soundness issue nor a threat to the fundamental material rights of the members,” wrote Whitehead.
The e-mail to Knebel was included by lawyers for the credit union in documents filed in federal court yesterday in conjunction with Knebel’s suit, but Knebel on Tuesday told Credit Union Journal he never received the NCUA message, which apparently was sent to the credit union.
NCUA has since provided a legal opinion in the case that says in generic terms (without naming the credit union) that federally chartered credit union bylaws bar mail-in ballots during director recalls, such as the ones used by St. Helens Community, and that federal credit union bylaws supersede state corporate laws and are binding, when clear and unambiguous.
Lawyers for the credit union have urged dismissal of the suit, filed in U.S. District Court for the District of Oregon, claiming that state corporate law, and not federal credit union bylaws, is the ruling authority in such cases. As a result, the lawyers claim that the federal court is not a proper venue to adjudicate the dispute. “As such, [Knebel’s] remedy is to enforce the bylaws as a contract between the Credit Union and [Knebel] in state court,” argue the St. Helens’ lawyers in the most recent filing.
Knebel and his allies claim the unsuccessful recall vote was rigged by a majority of the board. Among other allegations, the members claim the credit union’s bylaws, adopted from standard bylaws developed by NCUA, restrict voting on director recalls to only those members present at a special meeting and do not allow for mail-in ballots, as St. Helen’s Community allowed.
After the special meeting the credit union said 1,413 members voted, even though only 175 members attended the special meeting. The credit union has never disclosed the voting results.
But in a legal opinion issued in the case which never mentions St. Helens Community NCUA General Counsel Michael McKenna asserts that directors may be removed only by members present at a special meeting after the directors have had an opportunity to be heard. “The use of the phrase present at a special meeting’ precludes the possibility of voting in absentia by mail to remove a director,” he wrote. “If voting by mail were allowed in lieu of being present, members would be denied the opportunity to observe the director’s demeanor, hear the director’s defenses, and ask the director questions. The give and take that is part of being present at a special meeting provides a director with more due process and better informs the membership.”
