CU LOBBY SEEKS WITHDRAWAL OF GOLDEN PARACHUTE REG
ALEXANDRIA, Va.-The main CU lobby groups are calling on NCUA to withdraw a proposal that would limit executive severance payments, know as Golden Parachutes, for managers at troubled credit unions, saying the NCUA proposal is too subjective.
"NAFCU believes that the proposed rule is too broad and vague because it seeks to brand together all credit unions that are insolvent, undercapitalized, in conservatorship, rated CAMEL 4 or 5, subject to proceeding to terminate or suspend its share insurance, or in otherwise troubled condition," wrote Carrie Hunt, NAFCU's chief of regulatory compliance. "We also believe that the proposed rule does not clearly address the situation where the contract for payment was agreed to while the credit union is not in any of the conditions described in the proposed rule."
The Golden Parachute proposal, similar to one adopted for corporates last year, would bar CUs from entering into lucrative retirement agreements with executives who may have contributed to the condition of a CU that has failed, been conserved, is undercapitalized or has been rated either CAMEL 4 or 5.
The proposal would exempt existing agreements on "nondiscriminatory" severance packages. That means executives who may have helped cause big losses would still be able to keep long-time retirement packages they have already earned, such as the $6-million severance package awarded WesCorp FCU CEO Robert Siravo.
The proposal comes amid growing concerns that some executives that have overseen the failed CUs are walking away with multi-million dollar severance deals after they engineer mergers of their CUs into healthy institutions. Executives brought in to engineer such deals would be exempted from the new prohibition.
Roshara Holub, president of the Missouri CU Association, said Golden Parachute agreements have a positive effect in assuring that CUs are able to attract, motivate and retain important executives. "Key components in assessing appropriate, or inappropriate compensation and indemnification payments are knowledge and willful intent with actions absent good faith," wrote Holub. "These are separate from falling victim to unprecedented economic conditions or a market dislocation." Holub, soon to retire as head of the Missouri league, said NCUA already has the authority to taken action against abusive severance deals without passage of a new rule.
CUNA also opposes the proposal. "In CUNA's view," wrote Mary Dunn, head of regulatory compliance, "proposals on these subjects, especially the issue of indemnification, should reflect several important considerations. First, the system of credit union board governance, which depends in large measure on the willingness of volunteers to serve, is a remarkable and delicate structure that deserves protection and encouragement. This includes some measure of protection from the prospect of personal ruin resulting from legal proceedings that may or may not ultimately have merit."
"Also," she wrote, "we believe NCUA must be careful to avoid even the appearance that it is attempting to tip in the scales of justice in its favor by writing rules that would disadvantage credit unions or their officials should challenges under such rules occur, especially since NCUA has much greater resources to pursue litigation than do either credit unions or their officials."
DONATIONS SURROUNDING FINANCIAL REFORM BILL PROBED
WASHINGTON-A congressional watchdog group last week cleared five House members in its probe of contributions surrounding votes on the Wall Street reform bill, but recommended the House Ethics Committee investigate potential charges against three lawmakers who were avidly raising money prior to key votes on the bill.
The recently passed Wall Street bill attracted intense lobbying from all corners of the financial sector, with massive fundraising on a scale rarely seen in Washington, but it is difficult to tie fundraising to votes on a single bill.
One of the three, Tom Price, a Georgia Republican who held an important fundraiser Dec. 10 at the Capital Hill Club the day before he voted against the financial reform bill, denied wrongdoing. "There being no evidence of any wrongdoing or any inconsistency in my policy position, one can only guess as to the motive behind their decision or even why they chose to initiate a review in the first place," said Price, a member of the House Financial Services Committee, who sought $2,500 in campaign donations that day from political action committees and lobbyists representing banks and other financial companies.
That month Price raised about $29,000 from financial PACs and interests groups, including NAFCU PAC, American Financial Services PAC and PACs affiliated with the banks and accounting firms such as Bank of America, Credit Suisse First Boston, Deloitte & Touche and KPMG, according to records.
A representative for NAFCU, which gave Price a $1,000 donation after Dec. 10, denied any improprieties related to the campaign contribution. "NAFCU made a contribution to Rep. Price's campaign, as it routinely does to many congressional campaigns," said NAFCU's Patty Briotta. "It is our understanding from what we have read that this centers around the auto-dealer amendments to the financial reform bill that NAFCU neither took a position on nor lobbied."
Two other House members are facing potential charges from the ethics committee. They are California Republican John Campbell, also a member of the Financial Services Committee, and New York Democrat Joe Crowley, a member of the tax-writing Ways and Means Committee.
Campbell denied wrongdoing. Crowley's office did not respond to requests for comment. Officials at the Office of Congressional Ethics and the House Ethics Committee declined to comment.