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WASHINGTON – Bankers have been generally exulting in the wake of the recent decision by Magistrate Judge Don Bush’s decision to recommend that the U.S. Circuit Court for the Eastern District of Texas find for the $1.4 million Community Credit Union and against the NCUA. The credit union, along with the $1.2 OmniAmerican CU, had sued the agency in an attempt to force it to validate the charter change votes that both credit unions had already held. The agency notified the credit unions in mid-July that it would decline to do so because it alleged the credit unions had not fulfilled the agency’s disclosure regulations. The credit unions contended that they had and brought suit. Unless the government decides to appeal the Judge’s ruling, a decision which will be made primarily by the Justice Department with input from NCUA, the decision will mean that NCUA will have to validate Community’s existing charter change vote. If the government appeals, the appeal will likely forestall that action, since the government could not be expected to appeal a charter conversion that had already taken place, according to Bill Donovan, general counsel for NAFCU who was in the courtroom for the arguments and the decision. Donovan also explained that because Judge Bush based his decision so narrowly on the administrative record of how NCUA came to decide that Community had not fulfilled its disclosure obligations, the court’s decision would probably not have an impact on NCUA’s regulations themselves, even though Community had aggressively attacked the regulations in its legal arguments. Donovan did say that the Court’s decision would likely guarantee that both the agency and any future converting credit unions would “dot every `i’ and cross every `t’” when it came to future conversion efforts and document fully all their decisions and communications. The Justice Department declined questions as to whether or not it would appeal. Appeals of Judge Bush’s recommendation would have to be made within 10 days of his making it in writing, the Department said. Meanwhile, it remains unclear what impact the decision will have on OmniAmerican’s case. While closely linked, the two cases are not identical and OmniAmerican has a separate set of issues according to Donovan and other observers of the case which may need to be resolved in a separate hearing on August 31. Judge Bush asked from the bench during the August 17 Community hearing whether there was anything left to discuss in regard to OmniAmerican, according to Donovan. Initially it appears there is, Donovan reported, since NCUA has raised questions about a discrepancy between the number of members the credit union reported to the agency on its 5300 report and the number of ballots actually sent out in the charter change vote. As has become customary, OmniAmerican did not return phone calls seeking comment about the ruling or its prospects for a future hearing. Reactions Range from Disappointment to Joy Mark Arnold, spokesman for the Texas Coalition of Credit Union Members, explained that, in his organization’s view, the judge made his decision on two-thirds of the information. “We were very disappointed the Judge cited the 71% figure of members favoring the charter change in one ballot and not the 51% of members which opposed the change in the ballot for which they were properly informed. We absolutely hope the agency will appeal.” The member group may also be considering a class action lawsuit for breach of fiduciary responsibility aimed at members of the credit union’s board, but no one was available to comment on that possibility as of press time. But at least two banking groups quickly made their exuberance at the ruling known. America’s Community Bankers sent out a statement on the very day the Judge announced his decision, and the ABA weighed in the next day. “Yesterday’s decision is a win for all credit union members, since it reaffirms their right to choose the charter that best suits their needs. It also sends an important message to the NCUA, which has developed a habit of exceeding its authority and perverting the law to suit its own purposes,” said Edward Yingling, CEO of the ABA. “This is not the first time a judge has ruled that NCUA was out of line and, unless NCUA starts following the law, it won’t be the last. In a lawsuit ABA brought against NCUA in 2003, a U.S. District Court ruled that NCUA had not followed proper procedures in considering the application of Tooele Federal Credit Union to expand its common bond, and it sent the case back to NCUA for reconsideration. “ABA will continue to challenge NCUA when needed to ensure that the agency does not further and illegally skew the playing field between community banks and credit unions.” Meanwhile, in a related story, first term North Carolina Republican Congressman Patrick McHenry very well may remember this August recess as the Recess of the Credit Unions. According to sources familiar with his constituent meetings this summer, McHenry has faced credit union members and employees who are upset with his recent bill which would strip NCUA of some of its authority to regulate credit union charter conversions. At the recent meeting in Kings Mountain, a source estimated that fully 25% of the constituents attending were members and employees from six area credit unions who asked so many credit union questions that McHenry at one point had to ask if there were any more credit union questions. During the meeting McHenry reiterated his convictions that NCUA was “out of control” in its dealing with the $1.4 billion Community Credit Union and the $1.2 billion OmniAmerican CU on their conversion attempt and he felt that the issue had become personal because NCUA Board Chairman JoAnn Johnson didn’t want her budget to suffer the loss of having the two credit unions leave. -

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