Credit union members who live in the picturesque and remoteAlaskan city of Sitka have become embroiled in a controversy overhow their credit should be run.

The way the board of directors of the ALPS Federal Credit Unionhandled the 2009 termination of the credit union's popular CEOsparked the controversy. But it has since grown into a fight overhow board members have resisted attempts by some of the CU'smembers to recall them and over whether longtime board members arewilling to see the credit union adopt 21st century bestpractices.

On the one side are some of the credit union membership thatcharge the board with mishandling the former CEO's employmentnegotiations and with being uninterested in doing the sorts oftraining and learning required to run a credit union in 2011. Onthe other side are board members who fault the former CEO's jobperformance and insist that the petition circulated to recall themwas invalid.

The NCUA has weighed in with an opinion on the controversy buthas declined to take any action.

Sitka is a city on Baranof Island, located in the farsoutheastern part of Alaska that is about as far as you can go tothe southeast and still be in the state. Settled first by NativeAmericans, the island has also hosted Russians and Americans. (TheRussian Orthodox Cathedral of St. Michael the Archangel, built in1848 in Sitka, remains an important tourist landmark in the townand is the cathedral seat for the Alaskan Diocese of the OrthodoxChurch in America).

The $39 million ALPS FCU became a part of island life in 1960,when it was first founded to serve lumber workers living andworking on Baranof and surrounding islands. The credit unionoutlived the shrinking lumber industry and received a communitycharter to serve the residents of Sitka and two other smallcommunities nearby in 1985. Since then it has grown as thecommunity has grown, and fishing and tourism came to predominate inthe economy.

Roughly 8,800 people live in Sitka full time, and almost 3,100are credit union members, giving Alps a very strong penetrationinto a community which is also served by four banks. According toNCUA data, Alps had a net worth ratio of 13.54% in December of lastyear and return on assets of 0.42%.

Both critics of the credit union's board and Al Strawn, the CEOof the $344 million Matanuska Valley Federal Credit Union that Alpshired on an interim basis, agreed that poor communication betweenthe Alps board and the former CEO James Wileman had been at crux ofthe problems.

Wileman, who moved on to take a position as manager of a branchof Credit Union 1, headquartered in Anchorage, declined to speak onthe record about his time at Alps, except to deny that he didanything while CEO that would merit his treatment by the board thathe characterized as uncommunicative and dysfunctional.

A Sitka native, Wileman began working at the credit unionimmediately after graduating from college with a business degree.After working his way up through the credit union, the ALPS FCUboard hired him to be CEO in early 2006 after the former CEO,Sandra Jones, died of cancer while in the position.

Accounts of his tenure as CEO differ. Critics of the Alps boardinsist that Wileman had been a popular and active CEO who hadraised the credit union's profile in the community and reached outto bring in new members. “James would do things like bringdoughnuts or coffee down to the docks when the fishing boats camein,” said Tom Pratt, one of the critics of the ALPS FCU board aswell as a former chairman of the board and an organizer of thepetition to recall the current board. “He was very involved in thecommunity and in getting more people involved in the credit union,”Pratt said.

Critics of Wileman maintain that the CU had not been run allthat well under his leadership. But Pratt maintained that thosecritics were mostly people who failed to understand how thefinancial services world had changed and was changing.

Wileman had graduated from Western CUNA Management School andhad encouraged board members to take advantage of the free modulesthat CUNA had created to help further educate board members on theins and outs of running a financial institution. Pratt and otherboard critics point out that that the three of the nine boardmembers who had taken the CUNA modules resigned when the boardvoted to only extend Wileman's contract for one year at asignificant pay reduction. “We have a board that does not and hasnot done anything to move itself and the credit union forward,”Pratt said. “We are stuck in Mayberry here,” referring to thefictional North Carolina town depicted on the Andy GriffithShow.

The loss of the three board members dropped the count to six,which as an even number is not acceptable, so the board appointed aseventh member, a move that critics conceded was legal butcharacterized as “underhanded.”

Things came to a head at a meeting in January 2010 when membersdemanded to know more about how and why Wileman had been let go.When the board declined to answer questions about the issue,members began to circulate a petition for a special meeting topossibly recall the board. Pratt said they easily gathered morethan enough signatures to force the special meeting and that theyturned them over to the supervisory committee expecting thecommittee to schedule the meeting as the petitioners believed itwas required to do.

But the supervisory committee turned the petition over to theboard, believing that it had the responsibility to call the specialmeeting. The board declined to do so, arguing that the petition wasinvalid.

No member of the board would agree to be interviewed on thetopic, but interim CEO Strawn argued the petition was invalidbecause there was evidence that some people who signed it did notunderstand what they were signing. Further, the board hired anoutside law firm to analyze the petition, and it also said thepetition was not valid.

Strawn's account of the situation was that the credit union hadbeen in poor shape, as an organization, when he arrived as interimCEO, suggesting that there was a lack of internal controls andother measures common to running a CU under Wileman. Strawn'sinterpretation of the situation was seemingly supported when VickiWeidenhof, the former chief operations officer for the CU and alongtime employee, pleaded guilty to embezzling more than $187,000from the CU. Neither Strawn nor anyone else suggested that Wilemanwas at fault for the embezzlement, but Strawn did comment in thelocal press that Wileman had been CEO during much of the time ithad been going on.

Wileman countered last May in an e-mail to Strawn and the boardthat the embezzlement had escaped the scrutiny of auditors and NCUAexaminers and that similar cases of embezzlement have occurred ineven more tightly run CUs. The e-mail also noted that during histenure, the CU saw its CAMEL rating rise from 3 to 2 and that nointernal control issues had been presented as “outstanding” or“unaddressed” in exam reports.

And that is where the matter has stood for 2010 and into 2011.The NCUA, for the record, has come down on the side of thepetitioners and agreed with them that the board erred when it ruledtheir petition invalid, but it also declined to take any steps toback up its opinion.

“While we have informed ALPS FCU's supervisory committee that wedisagree with its determination regarding the member petition, theNCUA has determined not to initiate administrative action againstALPS FCU. … However, you and the petitioning members have theoption of pursuing legal action against ALPS FCU,” wrote ElizabethWhitehead, Regional Direct of NCUA's Region V in an Oct. 7, 2010,letter.

ALPS has announced a new CEO. John O'Brien, formerly a vicepresident with the $46 million Star Choice Credit Union,headquartered in Minneapolis, arrived with his wife and son inSitka in late January and is working with Strawn to assume the CEOduties.

Since a number of board critics are former board members, itmight seem logical that they would run for the board themselves.But Pratt explained that few wanted to work with the existing boardand would have to do so since, absent a special meeting, there isno way to vote in a majority of reform-minded board members. “Afterall that's happened, I just can't see anyone wanting to work withany of those folks,” he explained.