St. Helens Dismissed NCUA
The NCUA told St. Helens Community FCU President/CEO Brooke Van Vleet that absentee ballots could not be used in a recall election of five board directors in 2012, according to emails obtained by CU Times.
However, the credit union ignored that advice and mailed more than 15,000 absentee ballots to members anyway.
The failed recall election sparked a 14-month legal battle between the $177 million, 15,643-member credit union and 11-year member and small business owner Steven Knebel, who dropped his lawsuit in April and is running for a board seat at SHCFCU's annual meeting on June 24.
On Aug. 7, 2012, Van Vleet sent an email to Hilary A. Tormala, an NCUA supervisory examiner, and Brendan P. Kelly, an NCUA Region V examiner.
In that email, Van Vleet included an “analysis that supported the use of absentee ballots” for the recall election.
“The voting procedures for business conducted at a special meeting are not particularly clear as there is not a specific article with the (federal credit union) bylaws that addresses the unique issues of a special meeting,” Van Vleet wrote in her eight-paragraph email.
Tormala forwarded Van Vleet's email about the absentee ballot issue to Ruth Siragusa, a consumer access analyst for the NCUA's Office of Consumer Protection.
“In the event the credit union has to call a special meeting, the credit union is planning to use absentee ballots,” Tormala wrote in an email to Siragusa. “I was under the impression the vote for removing board members at a special meeting must be done in person by the members that attend the meeting.”
On Aug. 8, Siragusa confirmed the voting must be in person at a special meeting.
“The reason that the absentee ballot does not work here is that the members are not present to hear both parties speak regarding the petition, specifically, the person who they are trying to remove from office,” Siragusa explained. “The voting is done after the person(s) who are named in the petition have been heard. With the absentee ballot, the person(s) name in the petition have not been allowed to their right to be heard.”
Despite this advice, SHCFCU mailed and counted the absentee ballots at the Sept. 7 special meeting.
The board members kept their seats.
“When I read those emails, I thought this was the game, set, match,” Knebel said. “She inquired if she could do it. She got the answer no and she did it anyway.”
The St Helens, Ore.-based credit union board of directors said in a statement it shared with the NCUA a full legal analysis following the emaiil exchange to justify its use of absentee ballots, adding that the regulator “never intervened or directed the credit union to act otherwise.”
Knebel filed federal and state lawsuits last year that alleged bylaw violations during the recall election.
According to court documents, Knebel alleged the credit union counted mailed recall ballots, while federal credit union bylaws require recall elections to only count votes cast in person during a special meeting.
“The board's decision to utilize mailed ballots was made after considering a detailed legal analysis, which allowed broader participation from the entire membership – rather than a small fraction of members able to be present at a special meeting,” the SHCFCU board said in its statement.
The recall election failed to oust the five members; however, two years later, only two remain on the board.
Knebel said he dropped the lawsuit because he no longer had the financial resources. Before he dropped the suit, however, both parties attempted to reach an out-of-court settlement.
Knebel, who said the credit union approached him with the offer, said it would have required him and his wife to terminate their membership and close their personal and business accounts.
The proposed settlement also would have allowed the credit union to issue a press release that would have emphasized the importance of active participation by members and would have recognized Knebel's contribution to that participation, according to a document obtained by CU Times.
Van Vleet said it was Knebel's lawyers who solicited the settlement, and added the credit union's offer “would have been acceptable.”
When asked why he dropped the suit, Knebel said he got tired of fighting the issue.
“I spent almost $20,000 of my own money and was getting nowhere. When it got down to where they wanted to (take) depositions ... they wanted to depose me ... they wanted to depose all of my friends and family, it seemed like, so it was getting expensive. And then it would have gone to trial. There is no way they were going to win the trial, but there was also no way I was going to spend $40,000.”
The suit was dismissed without prejudice, which gives Knebel the right to refile the same legal action against SHCFCU, according to court documents.
Van Vleet said SHCFCU's legal expenses related to the suit amounted to less than 1.5% of its annualized professional services expenses in 2013 and for the first quarter of 2014.
The credit union spent a total of $910,584 in 2013 and $290,221 for professional services expenses in the first quarter of 2014, according to NCUA financial performance reports posted online.
“Legal expenses are a typical cost of doing business and are included in our annual budgeting process,” she said.
Knebel was part of a group of members who started a recall petition in June 2012 to remove the five directors after members became upset with the dismissal of former CEO Jeff Schwarz.
Knebel said the group also had concerns about a proposed merger with the $165 million Wauna Federal Credit Union in Clatskanie, Ore.
That merger was called off.
Knebel said he has gathered more than 220 signatures from credit union members to run for one of the three board seats up for grabs at the credit union's annual meeting.
He is running with three incumbents, Amanda Komp, Richard Louis and David Graham.
Knebel said he thinks his chances of winning a seat are good.