Hart noted in his letter that he had personally developed many of the systems that Lafayette uses for compliance with federal reporting regulations and offered to remain available to the credit union to train a replacement. Each Side Questions Performance

Responding to the allegations Hart made in his resignation letter, Lafayette Chairman Rosenthal said that Hart had been given "carte blanche" to help the credit union comply with the Bank Secrecy Act and had failed to do so.

He added that Hart had defamed the credit union's leadership by suggesting it had obstructed NCUA's April examination and said he had spoken with the examiner who had assured him that, from the examiner's perspective, no obstruction took place.

NCUA would not comment on any regulatory matter with the credit union.

Rosenthal pointed out that in his resignation letter Hart said he had "personally" developed the systems that Lafayette used for its BSA compliance, the same compliance Hart alleged the CU was failing to fulfill. "It looks to me like Hart failed to do his job," Rosenthal said, adding that Hart had considered Lafayette tellers and staff "stupid" on compliance matters.

But Hart stood by his allegation, agreeing with Rosenthal that he had been given "carte blanche" to develop a program which Lafayette could use to remedy its BSA compliance problems, but asserted that the problem had been in the credit union leadership's failure to take the program seriously and implement it.

"The key words in my letter were 'failure to actively implement' the program," Hart said. "As bad as they were, the problems they had could be fixed if they followed the procedures I developed."

And Hart suggested the credit union's problems with BSA compliance were significant. Hart said he had come on board full time with Lafayette on Nov. 1, but had started working part time on compliance issues for Lafayette earlier.

In mid-August of 2006, Hart said he, Mike Hearne, CEO of Lafayette and Rosenthal were called to a meeting in Atlanta with staff from the OTS, where, Hart says, they were told that if Lafayette were an OTS regulated institution it would have received a cease and desist order due to BSA compliance problems.

Hart contends that the Regional Director of OTS' Atlanta Region and the Region's General Counsel were among about 20 OTS staff at the meeting and that the OTS advised the credit union to withdraw its application, fix the BSA compliance problems and then reapply. "But of course they never did that," Hart said, "because they never fixed the problems."

Rosenthal did not return phone calls to comment on the meeting or Hart's account of it.

In Hart's view, the BSA compliance problems stemmed from a combination of a great deal of staff turnover since the departure of former Lafayette CU Bill Brooks and a "willful blindness" on the part of the credit union's leadership to the scope of the problem.

Hart alleged that his review of the compliance situation at Lafayette found numerous cases of joint accounts where much, sometimes all, of one or both of the member's information was incorrect, including information which the credit union was mandated to have about its members by the BSA.

"I began to have stacks of returned mail in my office from bad addresses," Hart said. "Sometimes this was statements, sometimes it was welcome letters to new members, sometimes it was debit cards and credit cards," he said.

In an age of electronic banking and direct deposit, there were some members who simply had no real connection to the credit union other than through their online banking–and from a BSA perspective this was a problem because these members essentially became "unknown persons", Hart explained.

To try to rectify the information errors, Hart said he and Lafayette staff developed a program called MPU/MPV, which stood for member profile update and member profile verify. Hart said under the program tellers were supposed to check with members when they were at the counter about their addresses, phone numbers and other information. Once the change was made, the teller was supposed to enter a code to show that a change to the file had been made.

But Hart said he soon found out that tellers were not following through, either asking the questions or updating the files–even though some were entering the code which said they had done so, a fact he put down to poor training more than anything else, though he said he drew the attention of the CU's leadership to the problem.

"I never believed the tellers at Lafayette were stupid or anything like it," Hart said. "There is of lot of turnover and not enough training, but I don't think any of them were incapable of doing the job."

Rosenthal countered Hart's allegations by asserting he had confused the difference between counter transactions and transactions that take place at an ATM or by mail. Hart denied this, noting that the transactions were coded and he was concerned with the data not being collected by tellers.

More serious were the instances where Hart said CU employees were opening accounts for members without getting the documentation required by the BSA. This not only led to BSA problems, but also opened the credit union to the possibility of fraud. Hart said he caught instances of accounts being opened with falsified checks and other falsified documents.

He said Lafayette had put a program into place where he or someone in the compliance staff would review account applications for BSA compliance before they were opened and transactions made on them, but Hart said he found out that accounts were being opened and the paperwork was simply not being routed to him for BSA review.

Hart said it gradually became clear to him that Lafayette was using him as "window dressing," someone to whom the credit union could point to as an authority on BSA policies that the CU was not, in fact, implementing.

This came to a head on April 10, Hart said, when he was working with a NCUA BSA examiner who was on-site with the agency's exam. Hart stated that Juan Marulanda, Lafayette's COO, approached him during the course of the exam and asked him to report what he was telling the NCUA's BSA examiner. Hart said he viewed this as attempted obstruction of the exam process because, in the light of what Hart said had been happening in regard to BSA compliance, he viewed the request for information as an attempt at damage control on the credit union's part.

After he was called into an office in front of NCUA examiners by Rosenthal, Hart said it became clear the leadership of the credit union did not intend to really correct its BSA problems, but instead were focusing on temporary or passing solutions and Hart concluded that it was his time to go.

Hart is more reticent to discuss Howard Mann, noting that Mann should be allowed to comment on his own circumstances. Hart did contend that Mann had been fired after becoming suspicious of a large real estate loan where the loan draws seemed suspiciously early and even. He also called Mann a "genius" albeit "a bit eccentric" and said he did not believe Mann deserved to have been fired.

Rosenthal's take on Mann's firing was that it was justified for what Rosenthal called "insubordination" and he contended that Mann had never fulfilled the duties the CU expected he would. Hart contended that Mann was fired because he may have uncovered significant problems with some of the CU's loans and procedures.

In looking back on his less than six-month tenure at the credit union, Hart says now he would have wanted to get a better idea of the organization's overall attitude toward compliance before he had taken the job.

"The thing is that I had retired from the government," Hart said. "Money was not my primary motivation for taking this job. I took the opportunity instead of a higher paying opportunity because I wanted to help some people who I thought might need a hand," he said. –[email protected]