A federal judge on Wednesday voided a new regulation that allowed occupation-based credit unions to expand by broadening their charters.

After harshly scolding credit union regulators, U.S. District Judge Thomas P. Jackson overturned their Nov. 14 decision allowing credit unions created for the employees of one company to enroll all members of a trade, industry, or profession.

Judge Jackson also ordered 136 institutions that have taken advantage of the new National Credit Union Administration rule to convert back to their original charters.

The judge criticized the NCUA as a "rogue" agency that "has functioned as a trade association" since July 30 when the U.S. Court of Appeals for the District of Columbia ruled that all members of occupation-based credit unions must have a common bond.

Judge Jackson threatened to refer NCUA officials to Attorney General Janet Reno for criminal prosecution, saying they had "colluded" with leaders of two credit union trade groups to draft an illegal rule without comment from the public.

The rule, Judge Jackson said, violated his Oct. 31 injunction enforcing the July 30 appeals court ruling in the AT&T Family Federal Credit Union case. "I find (the rule) was adopted with the specific intent to circumvent the terms of the injunction," he said.

The judge also rejected NCUA's request to stay his injunction while the Supreme Court considers the larger issue of whether occupation-based credit unions may serve employees at more than one company. The agency appealed to the Supreme Court Nov. 26 and expects the justices to resolve the case by spring.

"If what I have done is to be stayed, then it is up to the federal appeals court to do it," Judge Jackson said.

NCUA officials were outraged. "Judge Jackson seriously misunderstands NCUA's motives and what our role is," said agency General Counsel Robert M. Fenner.

Brenda S. Furlow, acting general counsel at the Credit Union National Association, said the industry would ask the federal appeals court to overturn the judge's orders.

Michael F. Crotty, the American Bankers Association's deputy general counsel, declared victory. "We got everything we asked for and were entitled to," he said.

During a 90-minute hearing, Justice Department lawyer Eric D. Goulian repeatedly argued that Congress had given NCUA the power to interpret credit union law. Safety-and-soundness worries, he said, had forced NCUA to approve the rule before giving the public a chance to comment.

But Christopher R. Lipsett, who represented the ABA, argued that the interim rule directly contradicted the judge's Oct. 31 injunction, noting that the rule would have permitted employees at IBM, Bank of America, and General Motors to join a single credit union serving the software industry.

"I cannot believe a shipping clerk at IBM, the chief financial officer at Bank of America, and an engineer at General Motors all share a common bond," he said.

Judge Jackson dismissed safety-and-soundness concerns, noting that the NCUA could not name a single institution that would have failed without the rule.

He also blasted NCUA for consulting with CUNA and the National Association of Federal Credit Unions when it drafted the rule. These groups acted in a "surreptitious, underhanded, and sneaky way," he said, when they worked to circumvent his order.

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