The NCUA has contradicted itself regarding the basis of amember’s lawsuit against the $161 million St. Helens Community FCUof St. Helen, Ore., and the examples of those contradictions aredocumented and working their way into court.

NCUA Public Affairs Specialist John Fairbanks said the agency isnot taking any sides on the case. “This is a matter before thecourt and we will wait to see what the judge decides.”

But that hasn’t stopped both sides from using the NCUA’s wordsin court, including a Sept. 7, 2012, email from Region V DirectorElizabeth Whitehead to a member, plaintiff Steve Knebel, thatinformed him the region had dismissed his Aug. 27 complaint thatSt. Helens violated Federal Credit Union Act bylaws when it countedabsentee ballots during a special meeting to recall five directors.Knebel had warned the NCUA ahead of the meeting that the creditunion had mailed more than 15,000 absentee ballots to members alongwith a letter from CEO Brooke Van Vleet encouraging members toretain the five volunteers because “an unwarranted and impulsiverecall at this time will be disruptive to the credit union.”

The NCUA has discretion to take administrative action when thoseviolations occur, Whitehead said, and when the agency contemplatesfurther action, it considers safety and soundness and whether aviolation of member rights occurred.

“We reviewed your complaint along with the information providedto us by the credit

union. Our investigation of this matter did not reveal there isa material safety and soundness issue nor a threat to thefundamental material rights of the members,” Whitehead said. Sheclosed by telling Knebel if he wishes to pursue the matter further,he should consult with his own legal counsel.

Incidentally, Knebel said he never received that letter,originally sent as an email, which was sourced by the creditunion’s legal defense April 12 as part of an ongoing attempt todismiss Knebel’s lawsuit, filed Feb. 6 in U.S. District CourtinPortland,Ore.

Because he didn’t learn about the existence of the letter untilthe credit union sourced it in a legal reply, Knebel filed a motionApril 17 to respond to it in court. Region V Director ofSupervision Kimberly Twieg confirmed in an email, which Knebelincluded in the motion as evidence, that it had been incorrectlyaddressed.

“Unfortunately, when sending you the original message we listedyour email extension listed as .ent rather than .net so our emailwas misdirected,” Twieg said.

The credit union originally filed to dismiss the suit March 1,with Knebel countering April 1 with a reply that included a legalopinion from General Counsel Mike McKenna that appears tocontradict Whitehead’s letter.

McKenna told Knebel in that opinion the credit union’s use ofabsentee ballots violated Federal Credit Union bylaws. McKenna alsoaddressed a credit union legal argument to dismiss the federal casewhen he said “state law has no role.”

Further, McKenna said a member’s “fundamental, material andcredit union member rights include a member’s right to participatein the election of directors and the right to petition for removalof directors and committee members.”

The legal opinion also said the bylaws “clearly andunambiguously provide that in-person voting is required at ameeting called to consider removal of a director.”

Knebel said he interprets McKenna’s legal opinion to mean thatby violating the bylaws when it counted absentee ballots,St.Helensviolated members’ rights to a recall election.

“McKenna made it abundantly clear,” Knebel said. “A specialmeeting to recall a board member is like a jury, and if you’re anabsentee voter, you’re making a decision based upon informationfrom just one side. I appreciate the credit union’s attempts tomake everyone’s voices heard when they sent out the ballots, butI’m sorry, it violated the bylaws.”

In an April 12 dismissal reply, the credit union’s legal defensedidn’t source McKenna when addressing the question of rights but.rather, sourced Whitehead’s Sept. 7 letter than said no rights hadbeen violated.

“As such, the plaintiff’s remedy is to enforce the bylaws as acontract between the Credit Union and Plaintiff in state court,”wroteSt. Helensattorney Harold B. Scroggins in the reply.

Further, Scroggins went into great detail regarding why the caseshould be dismissed on the basis of subject matter jurisdiction andargued the case should be handled by state court.

When the NCUA reincorporated federal credit union bylaws intoits regulations in 2007, it did so to assure the regulator couldtake administrative action to avoid costly litigation between acredit union and member when appropriate,. That incorporation ofbylaws into NCUA regulations did not, as Scroggins said Knebelclaims, affect a member’s ability to enforce the bylaws as acontract under state law.

“NCUA views its involvement in bylaw disputes as an alternativeto state court action. It does not usurp members’ state courtremedies,” Scroggins wrote.

Scroggins also sourced McKenna’s letter in its April 12dismissal reply, saying it interprets McKenna’s opinion regardingfederal versus state court venues to mean that “state law does notsupplant or alter the provisions of the bylaws. It does not addressthe question of whether federal courts have subject matterjurisdiction over breach of bylaw claims.”

The NCUA could have enforced the bylaws, but it declined to doso, Scroggins said. As a result of that decision, the NCUAauthority to enforce and interpret federal credit union bylaws isirrelevant.

The owner of two hydroponic gardening supply stores – and alongstanding member business relationship with the creditunions–Knebel is part of a group of members seeking more controlover the credit union after the board proposed a merger with the$152 million Wauna FCU and fired former CEO Jeff Schwarz. Although that merger has since been called off, the groupsuccessfully elected two of its own to the credit union’s board,and Knebel said the group will attempt to capture two more seats upfor grabs at this year’s annual meeting.

St. Helensspokespersons have declined offers to comment on thecase, citing a policy to not comment on pending litigation.