According to a copy obtained by Credit Union Times, the complaint disputes a March 26 exam report in which the $1.9 billion Irondale, Ala.-based corporate was cited for "ISI modeling and [net economic value] reporting inaccuracies and deficiencies."
Region I Director Mark Treichel, who was acting director of the Office of Corporate Credit Unions at the time, restricted Corporate America's investment purchases to floating-rate U.S. government and agency securities or U.S. Central Federal Credit Union guaranteed shares.
Additionally, Corporate America was required to "submit daily investment purchase reports and supporting documentation demonstrating its interest rate neutrality to Corporate Examiner Robert Dean and the [Alabama Credit Union Administration]," Treichel wrote, according to the complaint.
Treichel told Corporate America he would possibly alter or remove the purchase restrictions depending upon the outcome of his office's review. He asked the corporate to provide him and the ACUA with documentation supporting the claim that "ISI NEV reporting results are erroneous by no later than June 30, 2009."
CACU contends its September 2008 decision to move its net economic value modeling business from the U.S. Central-run CU Investment Solutions Inc. to the Denver-based FIMAC Solutions LLC is the underlying issue. The state-chartered corporate claims the Alabama Credit Union Administration supports its position, saying the state regulator wrote a June 3 letter to the NCUA stating that "given that FIMAC is the approved model, no violation of Part 704 occurred as it relates to NEV constraints. As such, no investment restrictions are warranted."
Treichel addressed the two models in a June 18 letter to CACU, reporting that both ISI and FIMAC NEV reports disclosed risk violations. However, he also wrote that the OCCU would utilize the FIMAC model results if it found the FIMAC model had been adequately tested, calibrated and validated.
Corporate America shot back on June 19 that ISI is not its NEV modeling provider and that the NCUA made a mistake in its numbers, incorrectly reporting a positive number as a negative. The complaint did not include the NCUA's reply, only stating that CACU's request was denied.
Throughout the summer the corporate said it communicated several times with Dean in an attempt to get the restrictions lifted. On Aug. 12, CACU asked the NCUA and the ACUA for permission to purchase a federal agency bond. The ACUA approved the purchase, but the NCUA denied it.
By Aug. 19, Corporate America was fuming.
"Just so ya'll know, the short fixed-rate bond I asked for permission to purchase one week ago today is now 12/32 more expensive. In other words, we lost the opportunity to make $93,750 in one week," the corporate wrote the NCUA.
The matter remained unresolved as of Sept. 18, the complaint asserts. The complaint also says the NCUA's investment restrictions have caused the corporate to lose $1.5 million in "forgone income" and claims the OCCU is delaying the matter until the NCUA Board passes new corporate regulations.
"If the credit union can buy a fixed-rate investments from U.S. Central, there is no different interest rate risk than if it buys another government-issued or guaranteed fixed-rate investment of like maturity," the corporate wrote. The only difference, it continued, is that the corporate would have the option to sell a non-U.S. Central investment at a premium if rates go down, whereas there would be penalty for doing so at U.S. Central.
CACU said the NCUA is acting illogically, unethically and unconscionably in requiring the corporate to use ISI for risk modeling and U.S. Central for investments because both organizations are ultimately under the NCUA's control.
Neither NCUA spokesperson Cherie Umbel nor Corporate America CEO Thomas Bonds had any additional comment on the complaint.