Many challenges confront credit union focused news reporting. Publishing daily via social media is hard. Staff is limited. Original stories take time to develop. Amplifying press releases is often an easy solution when faced with daily deadlines.
Credit Union Times and CUToday have developed important reporting niches however. If readers follow these original stories, they can provide insight into events that have consequences for the future of the cooperative system.
Following Court Documents
Peter Strozniak of Credit Union Times follows court cases about credit unions. On October 4, he reported on the embezzlement at the $3.2 Prairie View FCU: Former CEO Pleads Not Guilty to Embezzlement Charges. Some of the details in his coverage included:
- The CEO’s scheme lasted from 2010 until August 2020;
- She embezzled over $211,000 from 34 elderly members accounts;
- Created fraudulent loans for over $791,000;
- Formed 58 nominee loans by creating fake share loans in the names of relatives and friends
In eight of this ten-year fraud time frame, the credit union reported annual operating losses on its call reports. The credit union was merged in the first quarter of 2022 due to “its poor financial condition.”
The question that jumps out is how could NCUA examiners have continually missed this illegal activity for ten years?
Peter did not go there with this story, but the details certainly raise a core question about NCUA’s supervision of the FCU. It was small, with few employees and only 600 members. The call reports showed losses for most years. What does this case imply about the efficacy of NCUA’s annual examinations?
CU Today Goes to the Public Record
For most of this year, CU Today has summarized the merger activity posted from NCUA’s web site, Comments on Proposed Mergers.
Their latest reviews showed “CUs seeking to merge in multiple other CUs at once, combo’s in which the merging and acquiring CUs are both losing money, and several examples of credit unions reaching across state lines and even across country for merger partners.”
This reporting which includes the latest data and quotes from the member notices, takes a lot of work. Some examples.
One summary is for AIM Credit Union in Dubuque, IA. It is merging two Keokuk credit unions. Members of both merged credit unions were given identical Notice statements. They will be voting on the same day at the same location, First Christian Church. The two towns are 150 miles or about three hours apart. Was a local merger of the two credit unions considered?
In the merger of two Michigan credit unions, Community Alliance Credit Union ($108 million) with People Driven Credit Union ($355 million), the top three executives can receive a total of $542,000 in severance.
Community reported midyear capital of 8.39% and a loss of $73,000. The members were offered nothing of the over $8 million in capital being transferred. Is this an example of taking the money and running away?
The three-year old Maine Harvest FCU with 56% capital is merging so that “its mission of lending to farms and food producers will be better preserved with a larger credit union that embraces that mission.” Was this option researched at the start? Why not create a partnership, versus merger, with a larger credit union if more services are needed?
The $210 million Emory Alliance Credit Union in Decatur GA is merging with Credit Union 1 whose main office is listed as Rantoul, Il. One wonders why? Were no local options available? Did Emory do any due diligence on behalf of their members, especially of Credit Union 1’s recent initiatives before recommending this out of state takeover?
Finally, the $226 million Parsons FCU in Pasadena, CA is merging with the $1.1 billion Skyla FCU in Charlotte, NC. Parsons has almost 11% capital. Merging with a credit union across the country, especially with very strong instate options, would appear contrary to every common sense notion of member service and value. What is the reason for this “merger” almost 3,000 miles away.
Presenting the Facts for the Public
CU Today and Credit Union Times are serving a vital public, cooperative service developing this fact-based reporting.
Both media raise important questions about motivations and fiduciary duty of persons responsible for these events.
This original reporting raises critical questions about the directions of credit unions, the regulator’s oversight and how members’ best interests appear to be so cavalierly and repeatedly disregarded.
Sooner or later the stories behind these events will come out. The political and repetitional consequences will impact every credit union even when excesses may be the work of only a few.
A diligent, informed and questioning press is critical in holding those in positions of responsibility to account. CU Today and Credit Union Times are doing the job of the 4th estate. Are credit union leaders getting the message?