ARLINGTON, Va. - The ongoing struggle between NCUA and the $1.4billion Community Credit Union over whether the credit union willhave to ask its members to vote again on whether or not to become amutual bank entered a bit of a lull last week. Each side has chosenup its lawyers and the initial dates for the case have been set.NCUA's filings in the matter are due by August 8 and the firstarguments before a Magistrate Judge have been set for August 17.Community CU filed suit in U.S. District Court for Eastern Texas onJuly 15 and asked the court for an injunction which would forceNCUA to recognize the ballot voting which concluded on June 21. Inthis round of voting, over 71% of the credit union members who castballots voted in favor of the charter change a sign, the creditunion maintained, that the members accepted the change. NCUA hasmaintained that the credit union violated its regulations in theway it prepared the first two mandated disclosure documents it mustsend to members (see related voting poll on page 4). The agency hasalso stated that, when members saw the third packet, which wasprepared in the way the agency said it required from the beginning,they voted narrowly against the charter change. To an outsider, thecase might appear to be mismatched. On Community's side, thelawyers come from a high profile and high powered D.C.-based lawfirm, Patton Boggs, led by an experienced litigator, Cass Weiland.By comparison NCUA brings a relatively unknown staff lawyer, ReneeOrleans, from the U.S. Justice Department's Civil Division. Butwhere she might be less experienced and have less staff support,she will also bring the weight of the Justice Department with herand the resources the government can bring to keeping up the fight.But Eric Richard, general counsel with CUNA said appearances candeceive. "I would caution anyone from thinking this is necessarilya mismatched fight," observed Richard, a lawyer who is veryfamiliar with agency litigation that involves the U.S. JusticeDepartment. According to Patton Boggs, Weiland has been a lawyerfor over 30 years and worked in both civil and criminal lawalthough it is not clear how much of his experience has dealt withadministrative law. According to the Justice Department, Orleanshas been a lawyer since 1993 and has represented governmentagencies for almost her entire professional career. Since April of2001 she has represented the Department of Justice's Civil Divisionand has spent much of her time detailed to the Office ofIntelligence Policy and Review, an assignment that ended just lastmonth. Richard explained that Justice Department lawyers have areputation for having joined the Department looking for litigationexperience and for generally being very bright and very welltrained. "If you work for the Justice Department, you are already apretty good attorney," Richard said, "and Justice Departmentlawyers sometimes take almost a perverse pleasure in beating aprivate industry lawyer in a case," he added, though he admitted hewas unfamiliar with the work of Weiland or Orleans. He alsoexplained that judges often give Justice Department lawyerssomething of a break because they know that they generally don'thave an army of paralegals or associates to call upon to help themin their cases. "Judges usually understand that it might be justthe JD lawyer burning the midnight oil working on their briefs," hesaid, "and that can mean they hold the private industry lawyers toa higher standard." This is a similar view to that of Robert Liles,the principal shareholder in Martyn Liles, a Washington D.C. lawfirm which has a lot of experience in litigating before federalagencies. Liles said that he has always been impressed with thecaliber of the Justice Department lawyers and said that he expectedthe judges in the case to "cut through" a lot of the subsidiaryissues and get to the core of the matter which is, in his view,that NCUA has the authority to oversee credit union-to-bank charterconversions. He also speculated that the Justice Department maypoint out immediately that the credit union has not taken fulladvantage of its existing remedies by appealing the RegionalDirector's ruling to the NCUA board. Failure to do this, in hisopinion, hurts the credit union's case for the injunctive relief ithas sought. Slowing The Pace? In the meantime, the ongoing disputeappears to have, at least temporarily, slowed the pace of othercredit unions which might consider a charter change move, accordingto Alan Theriault, a consultant with CU Financial Services, aleading firm which helps credit unions change their charters. "Ifthe NCUA wanted their actions to have a chilling effect on creditunions thinking about converting, they have done so," saidTheriault. "But I don't think there has been any overall slowing ofinterest. I predict there will still be additional credit unionswhich will convert before the end of the year." Richard Garabedian,a partner with the D.C. law firm of Luse Gorman Pomerenk and Schickwho also consults on conversions agreed. He said that none of hisclients have specifically cited concerns over the NCUA/Communityfight but that it is no surprise that credit unions might find theregulatory environment surrounding the issue to be unsettled,especially since part of Community's suit attacks the NCUA'sregulation directly. A Different Tack? Meanwhile, NCUA has writtenOmniAmerican Credit Union requesting more information before it canmake a final decision about whether or not to certify the creditunion's charter change vote, which it conducted in mid-July.OmniAmerican received the same letter from the agency earlier thisyear that declared its charter change disclosure packets violatedthe agency's regulations and promising that the agency would notcertify the disclosure and voting procedures based on thosedisclosure declarations. Now in a letter dated April 25, NCUARegional Director Jane Walters has asked the credit union to"reconcile the disparity" between the 251,000 members that thecredit union's last call reports lists and the approximately 99,000ballots that the credit union said it sent out. Walters also askedfor information from the credit union about its instructions toFinancial Press L.L.P. about the building and mailing of thedisclosure packages and ballots. This letter has led some sourcesto speculate the agency may be looking more closely into how bothOmniAmerican and Community conducted its charter change [email protected]