NCUA Playing JPMorgan Details Close to Vest: McKenna
The NCUA told Credit Union Times Thursday it cannot show its hand by releasing the net amount of the JPMorgan Chase settlement that was applied to the corporate stabilization fund.
“When you are playing high-stakes poker against the most powerful, deep-pocketed financial interests in the country – with billions of dollars at stake – you don't show the cards in your hand. Any strategic information we share would give our opponents a competitive advantage at the negotiating table,” said NCUA General Counsel Mike McKenna.
“Revealing any legal strategy would only hurt, not help, NCUA's efforts to maximize recoveries for credit unions,” McKenna continued.
McKenna said the NCUA’s strategy up to this point has produced recoveries totaling $1.75 billion.
“As a result, credit unions are much less likely to be charged any more corporate stabilization assessment,” he said.
McKenna suggested that the net amount could be disclosed in the future.
“When all the litigation is finally concluded – and that could take years – then it will become a different issue in terms of disclosure. At that point there will be no harm in disclosing our contractual arrangements,” he said.
In October of 2012, Rep. Darrell Issa challenged the NCUA’s contingency arrangements with two law firms, the Washington-based Kellogg Huber and the Chicago-based Korein Tillery. Issa claimed the NCUA had violated an executive order prohibiting federal agencies from the agreements.
In an Oct. 16 letter to then-NCUA Inspector General William DeSarno, Issa said the agreements stated the firms would collect 25% of all claims recovered from the bank plaintiffs. Law firms had received more than $40 million from $170 million in settlements with Citigroup, Deutsche Bank Securities and HSBC at the time. The $127.25 million balance was applied to the corporate stabilization fund.
In February 2013, DeSarno told Issa the NCUA was acting as a conservator and not a government agency when it pursued the damages in court.
DeSarno, who retired from the NCUA June 1, 2013, called the 25% contingency agreement reasonable. If the 25% contingency fee arrangement still applies, law firms would receive as much as $350 million from the JPMorgan settlement.
Despite the NCUA’s $1 billion repayment to Treasury in December 2013, the agency must still refund $2.9 billion in outstanding Treasury borrowings before any remaining Stabilization Fund distributions can be made to credit unions legally. The agency said any potential repayment to credit unions is not likely to occur before the expiration of the Stabilization Fund in 2021.