Metsger Defends $1 Billion in Contingency Legal Fees
Defending the agency’s legal fees, NCUA Chairman Rick Metsger said that efforts to recover damages associated with the failed corporate credit unions likely would have failed if the board refused to pay legal bills on a contingency basis.
That payment arrangement, of slightly more than $1 billion, was transferred from accounts the NCUA manages from the recoveries from the banks they reached settlement agreements with—leaving the agency with some $3.1 billion in recoveries after the fees and expenses were paid.
The legal fees were paid to two law firms-- Korein Tillery and Kellogg and Huber, Hansen, Todd, Evans & Figel.
In a letter last month, Rep. Mick Mulvaney (R-S.C.) told Metsger that the NCUA’s budget was increasing too quickly and he raised additional questions about the agency’s legal fee arrangement.
President-elect Donald Trump recently announced he intends to nominate Mulvaney—who has been a critic of NCUA management times—as the director of the Office of Management and Budget.
In his letter to Metsger, Mulvaney said that he is concerned about the NCUA’s “persistent failure to control expenses,” adding that the agency’s budget has continued to “balloon.”
He also said a more prudent decision about legal fees might have saved the agency billions of dollars.
In response, Metsger said that the NCUA has a fiduciary and legal responsibility to seek damages from the Wall Street firms whose sale of investments in faulty residential mortgage-backed securities resulted in the downfall of corporate credit unions.
“In hindsight, it is hard to see how NCUA could have brought these cases at all without the contingency fee arrangement,” Metsger wrote.
The legal battles have allowed the agency to repay all the money borrowed as part of the Temporary Corporate Stabilization Fund.
Metsger said the contingency fee arrangement insulated credit unions from paying the cost of litigation if the suits were unsuccessful.
“The litigation has been every bit as complex and contentious as we had anticipated,” he wrote
Turning to the budget, Metsger wrote that the document was the most transparent budget the agency ever has produced. He said the 2017 spending plan represents a 1.6% decrease from the original budget the agency proposed. The budget includes a 1.4% staffing decrease in 2017 and a 1.8% cut in 2018.
The document incorporates recommendations from the Exam Flexibility Initiative working group, he said. In addition, spending as part of the Enterprise Solutions Modernization program, will save the agency on travel costs, since examiners will be able to do more of their work offsite.