ALEXANDRIA, Va.-The continuing fallout from the National Credit Union Administration's closed board action to put three of its regional directors on notice of determined penalties (Jane Walters, Region VI, Nicholas Veghts, Region IV and Alonzo Swann III, Region III) and to punish Deputy RD Timothy Hornbrook (Region III) Supervision Director Steve Dennison (Region III) and Kent Buckham (former deputy director, Region III and present DD in the Office of Corporate CUs) (CU Times, Feb. 16) may result in an unexpected legal miasma for the credit union movement: huge legal fees and potential settlements of personnel appeals cases that could cost in the millions.
Credit Union Times has confirmed that Walters, Veghts, Swann and Buckham have retained the services of Michael Riselli, a prominent attorney here who specializes in civil litigation to represent them before the NCUA.
Riselli also represents Alan Carver, the former RD of Region III who claimed to have been forced to retire due to discrimination and retaliation because he voiced disapproval of the use of false duty station hiring which was the basis of both congressional hearings and a near-two-year investigation conducted by the Office of Special Counsel. In Carver's appeal, an investigation was conducted by the Director of the Office of Civil Rights for the U.S. Department of Commerce, Kimberly H. Walton, who found NCUA discriminated against him because of race. Specifically, that he was likely moved (NCUA had "mixed motives," she said) from Region III to a post in Alexandria as Director of Strategic Planning, in order to make way for Swann to become the first African American to attain regional director status (CU Times, June 2, 1999).
Carver's appeal has been postponed pending settlement negotiations, and Riselli would make no comment on the case, but it might cost the agency a reported half-million dollars, most of which would be eaten up by legal costs. Carver has steadfastly maintained that his treatment was unfair and created stress and strife in his personal life.
But that is not the only settlement made by NCUA over a personnel grievance. Lamont Gibson, the former director of Equal Opportunity Programs for NCUA has also settled a grievance based on a charge of discrimination, Credit Union Times has learned. NCUA will reportedly pay Gibson $275,000 and put him on paid administrative leave for one-and-one-half years. (He has now left the agency and calls seeking comment were answered that no information was available as to the cause of his departure.)
Many sources both inside and outside the agency have asserted that there are other personnel grievances pending, and that, in fact, the number of such cases has shot up in the past several years. While that could not be acknowledged by NCUA at press time, Credit Union Times' sources are reliable.
The first step in the appeals process for the six officials would return consideration to the NCUA Board itself, as Walters, Veghts, et al., are expected to do, but the prospect of the board backstepping on its intended punishment is highly unlikely, given the statements made by Chairman Norman E. D'Amours in an internal memorandum to all employees issued on Friday, Feb. 11 (CU Times, Breaking News @ www.cutimes.com. Feb. 14).
In that memo, D'Amours drew a bright line, defending the Board's actions against the reprimanded officials for their role in the hiring scandal, stating that the issue is one "involving the fundamental premise that federal employees may not sign documents which they know contain false information. This is a basic principle which applies whether we are talking about personnel documents, procurement forms, travel vouchers, examination reports, or any other documents we prepare in carrying out our official duties. This responsibility also applies to documents which we instruct subordinates or co-workers to prepare or sign. One does not need training to know that it is wrong to sign or cause to be signed documents one knows are false," wrote D'Amours
The defense that some (or all) of these officials may offer is that the use of false duty stations to make certain that specified candidates be given some positions over consideration to others was a commonly-known methodology in the agency. That these staffers were pressured to carry out the implicit directive of higher-ups to diversify the workforce, and further, that it was virtually impossible for board members not to have known about it, whether it be in specific or general terms. (Karl Hoyle, the Chairman's executive director was terminated by the Board for allegedly carrying out the scheme. D'Amours strongly objected to his firing.)
Throwing off consideration that lower-level officials should have been shown any leeway because they lacked specific training in what D'Amours termed "arcane personnel matters," the Chairman charged that knowingly signing documents" they knew contained false information is usually grounds for the dismissal of federal employees."
That last brings the Board's planned consideration of Dottie Foster, former personnel director, and Russell White, current Region V Associate RD for Programs to an almost certainty they be terminated, as recommended by the OSC. Given that the Board exceeded the OSC's recommendations on the other officials, to do otherwise would be inconsistent. Foster and White's fate is scheduled to be taken up in closed session on February 24.
The OSC's final report concluded, however, that after a full investigation, there was no direct evidence that any board member had any knowledge of the scheme, nor in any way directed such methods be used to promote minorities or achieve diversity.
NCUA spokesman Bob Loftus reasserted, for the record, that the Chairman "denies any knowledge" of the use of false duty locations to achieve such a purpose.
And D'Amours' said in his memo that "As a federal regulator we have a special responsibility to carry out our duties with the utmost integrity. We can expect no less from our employees than the standard to which we hold credit union officials and employees. Accountability for misconduct should not be abandoned because its consequences may be unpleasant."
"That memo is B-- S--!" said one knowledgeable source, who also echoed the specter raised by others that the OSC's investigation stopped short of following a trail that would lead to others- not necessarily board members- who carried out the scheme as instructed. And if such a plan was undertaken without the Board knowing of it, what does that say about the leadership and moral example offered by the board itself? Some have maintained that they bear a responsibility akin to a military general whose troops carry out illegal orders. "Where is the Buck supposed to stop?" asked one aggrieved party, pointedly.
Worse, some have offered that a political agenda is being carried out that is a clear attempt to contain the investigation. Are there others who have escaped penalty who may be implicated? Are settlements in personnel cases being used to avert a fuller disclosure of the length and breadth of the scandal? Have these six been thrown to the wolves in an attempt to stymie further inquiries?
Board Member Yolanda Townsend Wheat did not respond to calls seeking to know if she was in agreement with D'Amours' memo, and Board Member Dennis Dollar has already indicated, on the record, his feelings that the punishment was harsh, given the special circumstances.
Meanwhile, as news of the shake-up makes its way through credit union-land, a number of CUNA affiliates have expressed concern over the matter, prompting CUNA President Dan Mica to write an official letter to D'Amours asking for a "full accounting" from the agency as to why such actions were necessary and what NCUA is doing to prevent future personnel problems.
That accounting may be difficult, however, given the confidential nature of financial settlements, once they are reached. Parties may not disclose terms of such matters.
While the total cost of such cases is lumped into the annual budget under a "settlements" classification, there is no way- save off-the-record sources and/or whistleblowers willing to speak to Credit Union Times- for knowledge of these events to be known.
But where is the financial accountability of the NCUA Board to credit unions that pay for the cost of these settlements? Should these six appeal and win, what might it cost the agency in continuing legal fees or settlements? And what happens in the field among rank and file NCUA personnel in the meantime? These penalties also raise the issue of the costs associated with replacing these RDs, which may include covering the costs of moving replacements. In an NCUA budget that is already under fire for being bloated (by NAFCU, specifically), those costs may not be small. And what of the morale and the added work pressure of promoting officials with less experience to replace these highly-experienced people? -
caburger@cutimes.com
