KAP Subject to Three LUA With NCUA Since April 2008
NCUA sent the Kappa Alpha Psi Federal Credit Union three non-published Letters of Understanding and Agreement since April 2008 before it finally issued its Aug. 3 liquidation order, according to the agency's records.
NCUA included the documents with its filing in a federal court case in which the credit union is challenging the liquidation order. In addition, the agency published one LUA with the CU and sent three letters from its regional director and one preliminary warning letter, all about ongoing problems that KAPFCU never appeared to overcome.
The agency's filing also attacked the credit union's assertion that its net worth ratio had reached 3.68% in June, including an affidavit C.W. Phariss, one of its Supervisory Examiners.
"The credit union's actual net worth at the time of the filing was actually 1.09%," Phariss testified in the affidavit. "The credit union's net worth calculation for June 2010 was inflated by the KAPFCU board's decision not to appropriately recognize a significant liability of $20,238 for a data processing expense. Due to their decision to disregard common accounting practice and NCUA guidance on accounting for small credit unions by reversing a previously recognized liability, a call report correction was required before the NCUA could validate the accuracy of the 5300. Contrary to the Plaintiffs' statements, Principal Examiner Ron Blosch did not validate the June 30, 2010, filing made by KAPFCU officials because he knew the numbers were inaccurate."