NAFCU president/CEO Fred Becker said Friday the revelation that the NCUA hired attorneys on a contingency basisto recover corporate investment losses is disconcerting because the$170 million in settlements received so far won't be fullyapplied to corporate stabilization.

“The agency indicated they had recovered $170 million, fromwhich I think the natural drawn conclusion was that money gotreturned to the coffers of the corporate system,” Becker said.“Obviously, that is not the case.”

Of the more than $170 million in claims the NCUA says it hasreceived as a result of settlements with Citigroup, Deutsche BankSecurities and HSBC, more than $40 million has been paid to the lawfirms.

The remaining $127.25 million – not the full $170 million – willbe applied to the corporate stabilization fund and potential reducethe corporate assessments charged each year to federally insuredcredit unions.

The NAFCU chief said the agency has a duty to fully disclose ifpart of the recoveries won't be applied toward corporate losses,because those funds belong to the nation's 92 million credit unionmembers, not the NCUA.

Further, Becker said, the news calls into question the NCUA'stransparency regarding its handling of the entire corporate crisis,something NAFCU has been pushing for the past two years.

“People continue to question the corporate recoveries and howthe bonds are really performing, and this brings all that back intothe forefront,” Becker said, adding, “What else haven't we beentold?”

Becker said he was less concerned about the selection process ofthe legal firms, which was made by NCUA staff and may havepolitical implications. The Wall Street Journal reportedthat the two firms retained for the suits had made significantcontributions to Democratic candidates.

NCUA Public Affairs Specialist John Fairbanks said it was NCUAstaff, not Chairman Debbie Matz, a Democrat appointed by PresidentObama in 2009, who hired the firms.

“Career legal staff selected specialized outside counsel forthis litigation based upon their expertise and resources to conductthis type of litigation,” Fairbanks said, adding that NCUA Boardmembers were kept informed of the action.

Fairbanks also said that retention of the firms was done “inaccordance with NCUA policies and with applicable law.”

Rep. Darrel Issa (R-Calif.) has asked the NCUA's InspectorGeneral William DeSarno to investigate whether the regulatorviolated Executive Order 13433, signed by President George W. Bushin 2007, which prohibits Executive Branch agencies from enteringinto contingency fee agreements.

“NCUA is pursuing these actions as liquidating agent for thefailed corporate credit unions, not as an executive agency, so theexecutive order does not apply,” Fairbanks said.