Even as he continued to lament the $1.1 billion in legal fees paid by the NCUA relating to the failed corporate credit unions, NCUA Chairman J. Mark McWatters reminded a member of Congress that no taxpayer funds were used to pay those bills.
"While the fees paid under these contracts may be subject to debate, their source is not," McWatters said, in a letter to Rep. Ann Wagner (R-Mo.), chairman of the House Financial Services House Financial Institutions Oversight and Investigations Subcommittee. "No taxpayer funds were lost through the restructure of the corporate credit unions and no taxpayer money was spent on attorney's fees, either directly or indirectly."
McWatters said that the funds came from the approximately $5 billion in money recovered from the legal settlements and that any money owed to the Treasury has been repaid, with interest.
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Wagner has been investigating the propriety of the contingency fees the NCUA has paid for lawsuits seeking damages relating to the failed corporate credit unions. The fees paid to two firms, Korein Tillery and Kellogg, Huber, Hansen, Todd, Evans & Figel represent 23.2% of the amount recovered.
Last week, Camden Fine, president/CEO of the Independent Community Bankers of America, accused the NCUA board of "rank" incompetence for incurring such bills.
In his letter to Wagner, Fine said that at the time that the agency incurred the legal expenses, it was supported by a draw from the U.S. Treasury.
McWatters said he has made it clear that he believes the legal fees were excessive and that the NCUA has attempted to re-negotiate those fees. He said that he and board member Rick Metsger were not involved with vetting the law firms or in negotiating the contracts.
"The agency should continue its efforts to negotiate a fair and transparent modification of these legal services agreements, where outside counsel has received, to date, over $1.1 billion in fees," he wrote in his letter to Wagner. "These fees are regrettably excessive, yet our good faith efforts to reach an equitable accord with the recipient law firms have not succeeded."
In response to previous congressional inquiries about the fees, the NCUA Inspector General's office investigated the contracts and said there was no impropriety in awarding them.
McWatters said that as conservator and liquidating agent for the five failed corporate credit unions, the NCUA board has a fiduciary responsibility to collect debts and obligations owed to those credit unions.
He said the NCUA board filed many lawsuits against entitities that sold faulty residential mortgage-backed securities to the institutions.
He said Congress created the Temporary Corporate Credit Union Stabilization Fund to accrue the losses from the five failed corporate credit unions and assess credit unions to pay for such over time.
The money that flowed into the fund came from two sources–$4.8 billion in assessments paid by insured credit unions and a $6 billion line of credit.
McWatters said that on October 24, 2016, NCUA repaid the U.S. Department of Treasury in full with interest, ensuring no loss to U.S. taxpayers.
McWatters said that the legal recoveries helped contribute to the closing of the Stabilization Fund, which could result in a distribution of between $600 million and $800 million to credit unions next year.
Neither law firm responded to a request for comment made last week after Wagner's probe was unveiled by Politico. However, on its website, Korein Tillery has cited its success in recovering funds on behalf of the NCUA.
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