LOS ALAMOS, N.M. — One of New Mexico's largest state-chartered credit unions has expelled its supervisory committee chairman in an apparent attempt to end investigations into possible board impropriety and election irregularity.

Joe Gutierrez, an employee of the Los Alamos National Laboratory, had been a member of the $306 million Del Norte Credit Union, headquartered in Los Alamos, for more than 18 years with his wife Bertha. Over the course of his membership in the CU, Gutierrez has served as chairman and secretary of its board as well as chairman of its asset-liability committee and, most recently, as chairman of the CUs five-member supervisory committee.

In early March, Gutierrez received a letter from the Del Norte Board informing him that both he and his wife had been expelled from the credit union. The credit card that he was allowed to use for credit union expenses was canceled, and the account the couple maintained with the credit union was closed and the money returned by cashiers check. An attachment to the letter indicated the board vote was seven in favor of expulsion and one against.

Gutierrez said the board's actions surprised him because, while the credit union's bylaws have long allowed the board to take such a step, Del Norte had a policy in place for years that called for a great deal of notification and due process in an expulsion proceeding.

The old policy, in place since October 1998, affirmed the board's right to expel a member when it decided such an expulsion would be in the best interest of the credit union. But the 1998 policy, which was reviewed and reaffirmed in April 2002, also required that management of the credit union investigate and try to resolve the matter before scheduling any expulsion vote. The 1998 policy also required the member be notified of the expulsion vote and be allowed to address the board prior to the vote.

But Gutierrez learned the Del Norte board had voted to replace the old expulsion policy only minutes before it voted to expel him and his wife, and that the new policy stripped out all of the expulsion due diligence procedures and notification provisions it previously contained. Under the new policy, the board could expel a member on a two-thirds vote and had to notify the member that he or she had been expelled. The new policy did allow 15 days for the member to request a reconsideration of the expulsion.

Gutierrez said he did not request any reconsideration because he would have to ask the board to reconsider its own actions, including having changed credit union policy with the sole aim of expelling him from Del Norte. “It didn't seem that appealing an expulsion decision to the board which expelled us would make much sense,” he explained.

But he added that, upon reflection, the board's strategy became transparent. If the board wanted to keep him off the supervisory committee, why not just remove him? The credit union's bylaws allow it to suspend or remove supervisory committee members on a two-thirds vote. But the bylaws also require that Del Norte's members must confirm the decision at a subsequent member meeting, and Gutierrez said he did not believe the board wanted to face such a meeting.

Further complicating his and his wife's situation, Gutierrez also soon discovered that an avenue of appeal that might normally have been open to him was prematurely closed at the same board meeting where he and his wife had been expelled.

Under normal circumstances, the chairman of a supervisory committee who believed a New Mexico credit union's leadership was trying to shut down a committee investigation might appeal for help to the state regulator, the Financial Institutions Division of New Mexico's Regulation and Licensing Department. But in this case, Gutierrez discovered, and other sources have confirmed, that FID Director William Verant had been in the room during the Del Norte board meeting and was specifically present for both the vote that changed the expulsion policy and the vote to expel Gutierrez.

“So essentially, the authority to whom I might appeal for help in this matter was actually present when the action was taken,” Gutierrez said. None of the sources would speak for the record about why Verant was at the meeting since they said that no one had explained his presence.

Bob Hagan, a spokesman for New Mexico's Regulatory and Licensing Department said Verant would not comment on why or in what capacity he attended the meeting because, he said, Verant considered the events at Del Norte to be “delicate situation” and one in need of “very careful consideration” before Verant would comment on it for the record. Del Norte is the second largest state-chartered credit union, by asset size, in New Mexico.

Gutierrez said he had tried to contact Verant for help, but that the director had not returned his calls or initiated contact. He said he was mystified as to why Verant might have been involved in the expulsion except to recall that, in 2004, he had led the credit union to contact a lawyer to contest a FID assertion about whether some of the credit union's expenses had been allowed under New Mexico's Credit Union Act. In a nine-page finding, the lawyer said that the expenses had been allowed and the department had dropped the matter, Gutierrez said.

Douglas Fraser, vice chairman of Del Norte's board, declined to comment on the expulsion, calling it a matter “private to the credit union,” and Clyde Leyba, listed as chairman, did not respond to detailed questions sent by e-mail. But when Gutierrez pressed the board for why it had expelled him, the board replied in an April 1 letter that it had done so because of his “repeated defamation, harassment, disruptive behavior, intimidation and abuse of management and board members both orally and in writing.”

Del Norte did not respond to requests for examples of the behaviors listed in the letter, and Gutierrez said he was not surprised because they could not have had any. “The only way they could say that abused anyone or defamed anyone would be to make it up,” he said, “fabricate it out of whole cloth. That's the only way.”

Gutierrez declined to discuss the details of one set of allegations, those of impropriety against a sitting board member, saying that if he named the board member or gave details about the allegations, he risked compromising an investigation that he considered ongoing.

But there is evidence that the board was attempting to keep the supervisory committee from investigating something, he alleged, and the member who asked for the investigation into possible voting irregularities also verified Gutierrez' account of events as well.

Beginning in April 2002, Del Norte had a policy in place, according to credit union documents, that allowed a unanimous vote of the board or the supervisory committee to engage outside counsel to help them in their work. Gutierrez said the supervisory committee had taken that step in early December 2007. But on Dec. 11, 2007, the board voted in a new policy that stripped the supervisory committee of the authority to hire outside counsel. This effectively slowed the investigation, Gutierrez said, and the committee had begun to work around the obstacle when he was expelled.

A member who had been a candidate for the board and then asked the supervisory committee to investigate possible voting irregularities also verified Gutierrez' report.

Luvella Reading, a member of the credit union, had been among six candidates running for three seats on the Del Norte Board in early 2007. She confirmed that she had written to the board and supervisory committee to contest the election results after a board member had contacted her with election results before the poll had closed. She also confirmed that nothing came of her complaints, and Gutierrez said that the supervisory committee had not been allowed to look into the matter because the board had destroyed the ballots.

Gutierrez said he is still considering his options and that he is looking into finding an attorney to help resolve the matter. Legal experts contacted about the case refused to comment on its specifics but said that if Gutierrez' account is correct, the events raise significant and disturbing questions about the credit union's governance.

Steve Bisker, a well-known credit union attorney, noted that the case appeared to point to one of the weaknesses in current credit union governance procedures. “In principal there is always a right for members to enforce the bylaws and procedures of their credit unions, but there are always practical questions about how to do that if litigation is the only really viable approach.”

But another lawyer argued that in his view the matter went beyond mere governance issues. “I think this case has very strong due process issues,” he said. “The credit union board could have had the credit union regulator in the room but not the member being expelled? That raises all kinds of questions about who's running that credit union and who's watching credit unions in New Mexico.”

–dmorrison@cutimes.com

Instant Insights /

Firing the Watchdog? - N.M. CU Expels Supervisory Chairman And State Regulator Attends Board Vote

Related Stories

Recommended For You