Credit union members who live in the picturesque and remote Alaskan city of Sitka have become embroiled in a controversy over how their credit should be run.

The way the board of directors of the ALPS Federal Credit Union handled the 2009 termination of the credit union's popular CEO sparked the controversy. But it has since grown into a fight over how board members have resisted attempts by some of the CU's members to recall them and over whether longtime board members are willing to see the credit union adopt 21st century best practices.

On the one side are some of the credit union membership that charge the board with mishandling the former CEO's employment negotiations and with being uninterested in doing the sorts of training and learning required to run a credit union in 2011. On the other side are board members who fault the former CEO's job performance and insist that the petition circulated to recall them was invalid.

The NCUA has weighed in with an opinion on the controversy but has declined to take any action.

Sitka is a city on Baranof Island, located in the far southeastern part of Alaska that is about as far as you can go to the southeast and still be in the state. Settled first by Native Americans, the island has also hosted Russians and Americans. (The Russian Orthodox Cathedral of St. Michael the Archangel, built in 1848 in Sitka, remains an important tourist landmark in the town and is the cathedral seat for the Alaskan Diocese of the Orthodox Church in America).

The $39 million ALPS FCU became a part of island life in 1960, when it was first founded to serve lumber workers living and working on Baranof and surrounding islands. The credit union outlived the shrinking lumber industry and received a community charter to serve the residents of Sitka and two other small communities nearby in 1985. Since then it has grown as the community has grown, and fishing and tourism came to predominate in the economy.

Roughly 8,800 people live in Sitka full time, and almost 3,100 are credit union members, giving Alps a very strong penetration into a community which is also served by four banks. According to NCUA data, Alps had a net worth ratio of 13.54% in December of last year and return on assets of 0.42%.

Both critics of the credit union's board and Al Strawn, the CEO of the $344 million Matanuska Valley Federal Credit Union that Alps hired on an interim basis, agreed that poor communication between the Alps board and the former CEO James Wileman had been at crux of the problems.

Wileman, who moved on to take a position as manager of a branch of Credit Union 1, headquartered in Anchorage, declined to speak on the record about his time at Alps, except to deny that he did anything while CEO that would merit his treatment by the board that he characterized as uncommunicative and dysfunctional.

A Sitka native, Wileman began working at the credit union immediately after graduating from college with a business degree. After working his way up through the credit union, the ALPS FCU board hired him to be CEO in early 2006 after the former CEO, Sandra Jones, died of cancer while in the position.

Accounts of his tenure as CEO differ. Critics of the Alps board insist that Wileman had been a popular and active CEO who had raised the credit union's profile in the community and reached out to bring in new members. “James would do things like bring doughnuts or coffee down to the docks when the fishing boats came in,” said Tom Pratt, one of the critics of the ALPS FCU board as well as a former chairman of the board and an organizer of the petition to recall the current board. “He was very involved in the community and in getting more people involved in the credit union,” Pratt said.

Critics of Wileman maintain that the CU had not been run all that well under his leadership. But Pratt maintained that those critics were mostly people who failed to understand how the financial services world had changed and was changing.

Wileman had graduated from Western CUNA Management School and had encouraged board members to take advantage of the free modules that CUNA had created to help further educate board members on the ins and outs of running a financial institution. Pratt and other board critics point out that that the three of the nine board members who had taken the CUNA modules resigned when the board voted to only extend Wileman's contract for one year at a significant pay reduction. “We have a board that does not and has not done anything to move itself and the credit union forward,” Pratt said. “We are stuck in Mayberry here,” referring to the fictional North Carolina town depicted on the Andy Griffith Show.

The loss of the three board members dropped the count to six, which as an even number is not acceptable, so the board appointed a seventh member, a move that critics conceded was legal but characterized as “underhanded.”

Things came to a head at a meeting in January 2010 when members demanded to know more about how and why Wileman had been let go. When the board declined to answer questions about the issue, members began to circulate a petition for a special meeting to possibly recall the board. Pratt said they easily gathered more than enough signatures to force the special meeting and that they turned them over to the supervisory committee expecting the committee to schedule the meeting as the petitioners believed it was required to do.

But the supervisory committee turned the petition over to the board, believing that it had the responsibility to call the special meeting. The board declined to do so, arguing that the petition was invalid.

No member of the board would agree to be interviewed on the topic, but interim CEO Strawn argued the petition was invalid because there was evidence that some people who signed it did not understand what they were signing. Further, the board hired an outside law firm to analyze the petition, and it also said the petition was not valid.

Strawn's account of the situation was that the credit union had been in poor shape, as an organization, when he arrived as interim CEO, suggesting that there was a lack of internal controls and other measures common to running a CU under Wileman. Strawn's interpretation of the situation was seemingly supported when Vicki Weidenhof, the former chief operations officer for the CU and a longtime employee, pleaded guilty to embezzling more than $187,000 from the CU. Neither Strawn nor anyone else suggested that Wileman was at fault for the embezzlement, but Strawn did comment in the local press that Wileman had been CEO during much of the time it had been going on.

Wileman countered last May in an e-mail to Strawn and the board that the embezzlement had escaped the scrutiny of auditors and NCUA examiners and that similar cases of embezzlement have occurred in even more tightly run CUs. The e-mail also noted that during his tenure, the CU saw its CAMEL rating rise from 3 to 2 and that no internal control issues had been presented as “outstanding” or “unaddressed” in exam reports.

And that is where the matter has stood for 2010 and into 2011. The NCUA, for the record, has come down on the side of the petitioners and agreed with them that the board erred when it ruled their petition invalid, but it also declined to take any steps to back up its opinion.

“While we have informed ALPS FCU's supervisory committee that we disagree with its determination regarding the member petition, the NCUA has determined not to initiate administrative action against ALPS FCU. … However, you and the petitioning members have the option of pursuing legal action against ALPS FCU,” wrote Elizabeth Whitehead, Regional Direct of NCUA's Region V in an Oct. 7, 2010, letter.

ALPS has announced a new CEO. John O'Brien, formerly a vice president with the $46 million Star Choice Credit Union, headquartered in Minneapolis, arrived with his wife and son in Sitka in late January and is working with Strawn to assume the CEO duties.

Since a number of board critics are former board members, it might seem logical that they would run for the board themselves. But Pratt explained that few wanted to work with the existing board and would have to do so since, absent a special meeting, there is no way to vote in a majority of reform-minded board members. “After all that's happened, I just can't see anyone wanting to work with any of those folks,” he explained.

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Alaskan Members&#039; Dispute with CU Board Still Unresolved

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