Steven Knebel, who sued St. Helens Community Federal Credit Union for allegedly violating bylaws during the failed recall election of five board members, lost his bid for a seat on the board of directors at the credit union's annual meeting this week.

Knebel was one of four candidates. Three incumbents – David Graham, Amanda Komp and Richard Louie – were re-elected to their seats on Tuesday, according to a prepared statement from the $177 million cooperative in St. Helens, Ore.

“Despite the fact that this credit union won't acknowledge a huge mistake in the past, I think they are in pretty good darn hands now,” Knebel said. “I think the board members are all good people, but I think they would improve their lot with the membership by recognizing this happened, that they made an error and that they are moving on.”

While SHCFCU did not acknowledge Knebel's candidacy for a board seat, board Chairman Tom Tussing said the election results reflect the progress the credit union has made in the past two years to strengthen its safety and soundness, invest in employee and members, serve the community and build for the future.

“Our leadership has a vision for growth and sustainability that is producing results,” Tussing said. “Richard, David and Amanda have served varying lengths of time, but each has played an important role recently in moving our credit union forward.”

Last year, SHCFCU expanded its field of membership in two counties and broke ground for a new branch.

The 2012 failed recall election sparked a 14-month legal battle between the 15,300-member credit union and Knebel, who dropped his lawsuit in April and decided to run for a board seat.

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.

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.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.

Emails obtained by CU Times show that the NCUA told SHCFCU President/CEO Brooke Van Vleet that absentee ballots could not be used in a recall election of five board directors.

However, the credit union ignored that advice and mailed more than 15,000 absentee ballots to members anyway.

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.

Read more: NCUA explains …

“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, 2012, 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, 2012, special meeting. The board members kept their seats.

The SHCFCU board of directors said in a statement it shared with the NCUA a full legal analysis following the email exchange to justify its use of absentee ballots, adding that the regulator “never intervened or directed the credit union to act otherwise.”

“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.

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.”

The suit was dismissed without prejudice, which gives Knebel the right to refile the same legal action against SHCFCU, according to court documents.