Management of the tiny Kappa Alpha Psi Federal Credit Union of Dallas, now under an NCUA liquidation order being challenged in a Washington federal court, ratcheted up their appeals for industry support comparing the litigation to a landmark civil rights decision.
"We hope the entire credit union movement can now pull together and stand with us to halt a liquidation procedure, which is unjust and unfair impacting both big and small credit unions everywhere by destroying the entrepreneurial spirit," declared Victor Russell, chairman of the low income CU.
In essence, complained Russell, the NCUA "never gave us a chance" before pulling the plug Aug. 3 on the $400,000, internet-based CU, which serves a black fraternal membership with 1,400 members nationwide.
Citing the CU's poor earnings record, 1.9% net worth and unacceptable practices, the NCUA ordered the CU be liquidated, a step challenged by KAPFCU days later in a Washington district court on grounds the agency had acted prematurely.
Lawyers for KAPFCU have called their NCUA suit a "landmark constitutional and civil rights case" drawing parallels in its importance to the U.S. Supreme Court Brown Vs. Topeka Board of Education decision.
It was unclear what kind of backing KAPFCU might receive from the industry but already coming to its defense has been the National Federation of Community Development Credit Unions, which characterized the NCUA proceeding as having an "Alice in Wonderland" quality.
In urging greater industry support, Russell suggested small CUs should consider "exactly what this kind of liquidation means to management and boards struggling to navigate this economic crisis as they work to be innovative as we did in developing our virtual platform."
"The NCUA," charged Russell "has simply turned its back on a fledgling credit union that was trying to grow." He also accused the agency of acting "on lies, supposition and innuendo by Region IV officials. KAPFCU never received an opportunity to be heard or defend ourselves." NCUA officials declined comment on the latest Kappa Alpha charges pointing to its rebuttal in court documents.
A procedural hearing on the KAPFCU/NCUA appeal is slated next Monday before U.S. District Judge U.S. District Court Judge Emmet Sullivan, who is hearing the case. In its liquidation move linked to a purchase/assumption transaction, the NCUA also awarded KAPFCU deposits to Hope Community FCU, a Jackson, Miss community development CU.
"I'm confident that if Debbie Matz, Gigi Hyland and Michael Fryzel actually knew the whole truth, I doubt that they would have voted to liquidate at all." Russell concluded in a statement. "Being victim to a surprise liquidation, based on a closed door, ex parte board meeting is simply un-American."