Who Will Run New Corporates?
WASHINGTON – With the credit union movement showing little appetite to punish or banish executives responsible for the crash of the corporate system, there is a high likelihood that many of the same people involved in one or more corporate failures will have a prominent future in the future of the corporate network.
“Certainly we’re upset, but sometimes you have economic situations that are beyond your control and you just have to live with it,” said Frank Gulley, chairman of the board at Marion, Ind.’s Afena CU, of the $53 million credit union’s plans to retain its membership in Members United Corporate FCU.
In fact, few individuals involved in the corporate meltdown have lost their jobs. Joe Herbst, CEO of Members United and chairman of the board for U.S. Central FCU, was hired to head a nationwide mortgage CUSO soon after NCUA took over failed Members United. Todd Lane, the chief financial officer at WesCorp FCU, now works as CFO of California Coast CU. And the senior management at Southwest Corporate FCU is expected to run the new corporate after the remnants of the one-time $12 billion corporate failure are combined with Georgia Corporate FCU.
“Who else is going to run the corporates?” asked William Anderson, president of Mid Oregon FCU, which plans to help recapitalize Southwest Corporate, even after losing $1 million in the failure of the Texas corporate. He said he is confident his $140 million Bend, Ore., credit union has benefitted far more than that $1 million loss during the 25 years it was part of the corporate, first as Northwest Corporate FCU, which was later merged into Southwest Corporate.
NCUA, in taking under conservatorship the five corporate failures, removed the CEO of each institution – U.S. Central, WesCorp, Members United, Southwest and Constitution – but in some cases allowed other top managers to remain in place. Many of those same executives are expected to retain their jobs after the re-chartering of some of the failures.
NCUA says there is little preventing the management and directors of the failed corporates from landing with new corporates, even those WesCorp figures who have been named by NCUA in a civil suit, or those individuals – some of the same figures – who are being pursued by NCUA in bond claims for the failure of U.S. Central. Several U.S. Central directors who were removed when NCUA took over the one-time $52 billion corporate are still CEOs of their own corporates.
Neither the fact that an individual has served on the board of a conserved credit union nor the fact that NCUA as conservator has sued an individual for breach of duty would in and of itself bar that person from serving on the board of another insured credit union, according to the federal regulator.
There are specific circumstances where changes on the board of an insured credit union do require NCUA’s approval. Such is the case for any “troubled credit union” (defined by NCUA’s rules to include any CAMEL 4 or 5), and for any federally insured credit union operating under a letter of a letter of understanding and agreement that requires NCUA’s approval of board and management changes. All corporate credit unions except Iowa are currently operating under such an LUA.