July 30, National Whistleblowers Appreciation Day, is the publishing date for Community Capital, Race, Equity and the Credit Union Movement.
Clifford Rosenthal and Michel McCray are co-authors. The book’s detailed case study is in Part Two. In an earlier post, I quoted Rosenthal on its significance even today.
The story of Kappa Alpha Psi FCU and its abrupt liquidation in 2010 is recounted in five chapters by McCray with frequent observations from participants and referencing key documents from NCUA.
This excerpt from Chapter 12, Alice in Wonderland, presents a core issue.
Regrettably, NCUA evaluated KAPFCU as if it were a mature credit union, defined as being ten years old with $10 million or more in assets. The accounting rules and regulations are entirely different for these small, new credit unions—but KAPFCU was improperly evaluated based on the much higher standard by NCUA examiners.
Ignoring the improvement in KAPFCU’s NWR to 3.67% by June 30, 2010, NCUA opted to move forward with liquidating the credit union. KAPFCU challenged NCUA’s action, bringing the case to the federal district court in Washington, D.C.
Ironically, KAPFCU’s court case may be the most significant challenge to the NCUA’s authority in recent memory. This tiny African American credit union was contesting the constitutionality of the Federal Credit Union Act and NCUA’s rules and regulations themselves. KAPFCU’s chief complaint was that it had not been afforded the full flexibility allowed under NCUA rules, regulations, and supervisory authority for credit unions of similar size and character. (page 178)
Tomorrow: the clash of personalities and backgrounds.