Commodore Perry Federal Credit Union of Oak Harbor, Ohio, isawaiting a ruling from the NCUA's Supervisory Review Committeeregarding an exam appeal that alleges that an NCUA examinerharassed employees and retaliated against the credit union after itcomplained. The appeal is only the fifth heard by the committee inthe past decade. None of the previous four were ruled in favor ofthe credit union.

The $32 million Commodore Perry FCU elevated its exam appealafter it was denied by Regional Director Herb Yolles in August.Thomas Renz, the credit union's president and chief developmentofficer, and CEO Mike Barr said the male examiner harassed and bullied employees, particularly female employees,to the point where the credit union leaders said they worried theirorganization was legally liable.

Barr said he contacted the NCUA's supervisory examiner andreported the conduct to her. He said he told the supervisor hedidn't want to file a formal complaint but did request that theregulator send another examiner to complete the exam.

Instead, the supervisory examiner, who neither Barr nor Renzwould identify, passed the information along to the NCUA's Officeof Inspector General, which opened an investigation. The examinerwas made aware of the credit union's complaints by his supervisorbefore the examination was complete, Renz said.

“Not surprisingly, when he finalized the exam and issued thereport, we found a lot of things were inaccurate, including scoresthat were downgraded, which we could see weren't justified,” Barrsaid.

Adding to the retaliation charge were “inaccuracies andfalsehoods” in the exam report that specifically contributed to thecredit union's downgrade to its lowest CAMEL score in history, Barr said.

Barr and Renz then submitted an appeal to Yolles in June,stating that they had the documentation to prove the examiner'sfindings were inaccurate. They received a letter that denied theappeal, although Yolles did promise to send a different examiner tothe credit union for its 2013 exam.

“I was very frustrated because we were never contacted by theregional office to discuss the facts,” Barr said. “That's shockingbecause the entire basis of the appeal is that we can prove thereport is untrue. All they did, apparently, was review theexaminer's report and come to the same conclusion he did.”

So, on Sept. 9, Barr and Renz submitted a 365-page appeal to theSupervisory Review Committee that included documentation they sayproves the exam findings are inaccurate. The two said they alsorequested to appear in person before the SRC, as is their right,but have not yet received a response from the NCUA.

“This is not a case of a credit union being angry about a badexamination score. This is an extremely clear case of retaliationthat clearly demonstrates the problem with the NCUA appellateprocess,” Renz said.

Documents provided to Credit Union Times reveal the examineraccused the credit union of not detailing a cost-benefit analysisof existing products, services and facilities; not reconciling bankaccounts, particularly before a planned system conversion; andpaying more, not less, for outside professional services as aresult of the conversion. The credit union also provideddocumentation that it said proved it did, in fact, complete the duediligence in question.

On Aug. 27, Commodore Perry FCU sent a second letter to theNCUA, detailing five exam issues experienced by many credit unions,including the NCUA's presumption that examiners' findings arecorrect and the resources required to appeal exam findings. Thecredit union further asked to meet with the NCUA to discuss how itmight improve the process. In a letter to Sen. Sherrod Brown(D-Ohio), Renz said the response letter from NCUA said “the appealsprocess is good enough.”

Barr said despite the frustrating appeals process, the creditunion will continue to make its case.

“We remain hopeful that the NCUA Supervisory Review Committeewill review our appeal and make a just ruling,” he said.

Renz said while the credit union would like to return to itsprevious CAMEL score, its primary appeal goal is a “fair and justexamination, based upon fact.”

Renz said the credit union has also shared its experience withSen. Rob Portman (R-Ohio), who this summer signed on a sponsor ofthe Financial Institutions Examination Fairness and Reform Act,which would allow credit unions to appeal exams to anadministrative law judge.

The Ohio Credit Union League's John Florian, vice president ofgovernment affairs, affirmed Portman's support of the bill, andadded that nine Ohio representatives are also co-sponsors of theHouse version.

The NCUA's appeals process and high percentage of appeals ruledin the NCUA's favor has created a lack of confidence among Ohiocredit unions, Florian said.  

Ohio League Director of Media and Public Relations PatrickHarris said while the trade association has not quantified how manycredit unions in the Buckeye State have experienced exam issues,some have expressed concerns.

“I think a lot of that comes from the landscape of Ohio,” Harrissaid. “Sixty-six percent of our credit unions are $35 million andunder in assets, so some of these smaller credit unions are reallyhaving difficulty with NCUA transparency and exam consistency.”

As for the NCUA's side of the story, Public Affairs SpecialistJohn Fairbanks said, “We cannot comment on any aspect of anypending appeal.”