LOS ALAMOS, N.M. - Controversy over an invalidated supervisory committee election continues to swirl around Del Norte Credit Union, as a perhaps former, perhaps current member of the committee is leveling new charges of conflict of interest.
Chuck Montaño, who happens to be the fraud and special audits director for New Mexico’s Office of the State Auditor, has been a member of DNCU for 30 years. He has served on the credit union’s supervisory committee for four years; twice elected to two-year terms.
Earlier this spring, Montaño and another supervisory committee incumbent, Leo Varela, came up for re-election. According to Montaño, two days after member voting closed on April 27, Roger Stutz, the chairman of DNCU’s nominations and elections committee (NEC), invalidated the 2008 election results based on a by-law change that was not approved until April 29. The new by-law designated supervisory committee members as appointed by the board, rather than elected by the membership.
“The NEC chairman, who is a friend of the board chair and not elected, retroactively applied a by-law change that was approved two days after the election was completed,” Montaño alleged to Credit Union Journal. “It’s a mess. It’s amazing. We have a fiduciary duty to the members and that’s my concern. I am not even sure if I am still a member of the supervisory committee, because I can’t get a response from the board.”
When reached by telephone, Chuck Valenti, DNCU’s president and CEO, declined to comment on Montaño’s allegations. Valenti also would not confirm if Montaño remains on the supervisory committee.
Letter to State Regulator
On May 28, Montaño sent a registered letter to William Verant, director of the Financial Division of the New Mexico Regulation & Licensing Department, a copy of which Montaño provided to Credit Union Journal. In the letter, Montaño charges Verant could not find time to meet with members of the supervisory committee despite repeated requests over the past few months.
“During the same timeframe, however, you did manage to meet with the DNCU Chairman and Board more than once; not to mention attend the May 7th annual membership meeting which, as a former federal bank examiner, I found rather disconcerting,” he wrote.
Montaño’s May 28 letter goes on to warn Verant of the importance of avoiding even the appearance of a conflict of interest, and “the corresponding loss of objectivity or independence in carrying out the duties of a regulator that can result.”
“By meeting with only one group of elected officials, i.e. the Board, while ignoring the other group, namely the Supervisory Committee, you therefore lacked the balance and perspective to understand fully the implications of what has seen occurring at, and leading up to the May 7th annual meeting,” Montaño wrote.
The May 28 letter concludes with Montaño’s formal challenge to the validity and legality of actions taken by the Del Norte Credit Union’s NEC chairman, board chairman and the DNCU board to invalidate the 2008 supervisory committee election. Montaño is requesting that Verant direct the DNCU board and its chairman to make the election results available immediately to him and to the entire DNCU membership.
“As you know, by regulation the results of all credit union elections must be reported to the general membership, thus I’m not asking for anything out of the ordinary,” Montaño wrote.
“I am trying to get Bill Verant, the regulator, to take a position on the election,” Montaño told Credit Union Journal. “He has allowed things to go to this extent. Perhaps we should have notified his supervisor, the director of licensing and regulation for the state of New Mexico, earlier, but we are doing so now. I have found out recently Verant is a friend of the board chair, so there is some politics going on. They jointly lobbied for legislation together in the past.”
Even before the controversy over the invalidated election, the supervisory committee and the DNCU board had been clashing over audit reporting. Montaño contends the board directed the auditor not to include the “cause” for negative findings.
During an audit, Montaño noted, there typically is an institutional policy or an industry standard associated with a negative event–for example, a cash drawer being left unattended and unlocked.
The cause is the fourth of five components, he said, and if the cause is a policy failing, then the fifth step is a recommendation for change.
“We were told when we put the cause in the audit report and it has to do with mismanagement, it opens the credit union to legal liability,” Montaño recalled. “My response to that is, our job is to report what we find. I have four professional certifications. If I support any report that is misleading or incomplete, someone could report me and request my professional standing be pulled.
“I wasn’t just a member of the supervisory committee,” he continued. “I was an audit professional with certifications that required me to do certain things or risk losing my professional standing, and I wasn’t willing to do that. I used to be a regulator myself. I was a bank examiner, and we were prohibited from injecting ourselves into the election process of any of the institutions we regulated. I have been in the field for 30 years, so I know a little bit about auditing.”
Vote ‘Tossed in Trash Can’
Montaño said the recent supervisory committee vote was “tossed in the trash can.” He said the members’ votes were disenfranchised, and the people who ran for the election were disenfranchised.
“I wonder if the regulator is going to force the credit union to abide by the law and report the results of an election that has been concluded. It is as simple as that,” he said. “I might not have been re-elected, and that’s fine if it is the will of the membership, but I have the right to find out and the other candidates have that right as well.”
