NEW YORK – Even though it led to a potential $15 million loss, Municipal Credit Union has no regrets for allowing its members access to cash through its ATMs in the wake of the September 11 attack even though it was unable to verify how much money was in their accounts at the time. Approximately 100 members who abused its relaxed rules face arrest and possible prosecution. Still, the $1 billion, 290,000 member credit union, with its main offices opposite the site of the former World Trade Center, said it stepped up to help members in what was an unimaginable tragedy. "In the context of the time we definitely have no regrets," said Thomas Siciliano, general counsel for the credit union. "A large percentage of our members are policemen and firemen and in the wake of 9/11 some of these people were lost, some were missing, their families didn't know where they were. When it was confirmed that we had lost our NYCE [New York Cash Exchange] connection we opted to serve our members, even though we knew that a percentage of them would take advantage [of the situation]," he said. Siciliano pointed out that the credit union has almost 300,000 members, 4,000 of whom overdrew their accounts in the wake of the attack, the vast majority, he said, by fewer than $100 dollars. The credit union had been forced to call in the District Attorney for only the 101 most egregious cases, he said. On August 5 Manhattan District Attorney Robert Morgenthau announced the arrests of 62 people for grand larceny in the amounts they overdrew from their credit union accounts and the search for an additional 39. As of the close of business on August 5 the figure stood at 66 people arrested and 35 sought, according to the District Attorney's office. The total take from the credit union was estimated to be as much as $15 million, although Siciliano estimated the credit union had already recovered more than 50% of that amount. Sherry Hunter, spokesperson for the District Attorney confirmed that the credit union members targeted for arrest had been those who had, first, overdrawn their accounts by at least $7,500 and, second, either spurned or failed to respond to the credit union's attempts to get them to pay back what they owed. The credit union had employed letters and a collection agent to try to get repayment, she said. Siciliano said a number of members (he didn't know precisely how many) who had overdrawn their accounts had been approached by the credit union and had agreed to have their debt translated into a loan that they could pay back over time. He was not sure of the loans' terms except to say that the interest was charged on the money and that it was a "market rate." The situation at the credit union drew widespread media attention in part because, Siciliano speculated, some of the cases had been "terribly egregious" and because they were drawn from seemingly very average people including nurses and city employees. Among the top cases cited by the District attorney were: * Terry Hutchinson-Jones, a nurse at Manhattan Psychiatric Center, overdrew her account to the tune of $18,111.01 in the six weeks following September 11. Hutchinson-Jones made 23 withdrawals for the maximum $500 each, 54 total, even though she had never had a positive end of month balance in the eight months leading up to September 11, according to the District Attorney. * James Allen, a New York Housing Authority employee, overdrew his account by making 53 cash withdrawals from ATMs of between $20 and $300 each and by making 101 purchases using his MCU ATM card with the Visa logo. The purchases were at stores including Foot Locker, Jimmy Jazz, Joy Joy Jewelry, Bronx BBQ, Hot Booze Liquors and the 216th street motel. Mr. Allen never had an end of month balance of more than $130 in the eight months prior to September, the District Attorney said. * Jeannett Bonner, a school safety agent employed by the New York City Police Department made 80 ATM withdrawals between September 13 and October 22, which overdrew her account by $11,344.76. Sixty withdrawals were for $200 each, the District Attorney said. How could this happen? Siciliano said the credit union made the decision to adopt the policy of allowing withdrawals from its ATMs regardless of the ability to confirm balances as a direct result of the September 11 attack overwhelming the credit union's disaster recovery plan. "As most people probably know, disaster recovery plans are meant to tell you what to do if your whole building is wiped out or lost," Siciliano said. "They don't tell you what to do if the whole center of New York is wiped out. Our disaster recovery plan was just overwhelmed, that was the crux of the problem," he said. Siciliano said that as soon as phone communication was restored, three or four days after that attack, the credit union management contacted the board about the ATM situation, alerting them to their decision and getting verbal assent to it. He did not know if the board actually voted to endorse the policy or not, but said the board definitely indicated its approval. The decision the board endorsed was management's choice to allow the New York Cash Exchange (NYCE) Network to continue to complete transactions for credit union members even though the network could not reach the institution to obtain a balance, according to Susan Zawodniak, executive director with the Network. Virtually all NYCE's participating financial institutions use what Zawodniak called the "Stand In" policy to protect their members' access to their funds when the network's connection to the institution is either broken or transactions simply "time out" or take too long. Under the policy the financial institution alerts NYCE to the daily limit it will allow NYCE to cover through "standing in" – in this case $500 – and then settles with the credit union daily, Zawodniak explained. It remained unclear as why the credit union kept the stand-in policy in place until November and why the credit union could not tell whose accounts were being overdrawn. Siciliano pled ignorance to both questions and said that, as general counsel, the details of technical and accounting questions were beyond his purview. What is clear is that if Municipal made the change that XCEL FCU made after the 1993 attack on the World Trade Center, it may not have had this problem. The 1993 attack led XCEL FCU, the $76 million institution which had its main offices in the Trade Center, to move its data processing and networking facilities from the WTC to offices in New Jersey. So when the September 11 attack hit the WTC, XCEL maintained its system up and running, by and large, although it lost links to certain individual ATMs, according to Linda McFadden, chief operating officer for XCEL. "We lost some contact with individual machines," McFadden said, "and there were some days when we actually had employees meeting our members on subway platforms to deliver their needed cash, but by and large we kept up and running." According to Zawodniak, the NYCE network stayed up throughout the attack and so, had Municipal kept up its link, it would have likely been able to have checked the accounts from which funds were being withdrawn. Where were the regulators? Municipal Credit Union is a state chartered, federally insured institution, but neither the New York State Department of Banking nor the NCUA appeared particularly concerned with the policy. "We worked with both banks and credit unions after September 11 to make sure that customers and members had access to their money," said Bethany Blankley, Director of Public Information for the New York State Department of Banking. She refused to comment on whether the Department of Banking had known of Municipal's policy on the ATM access and whether it was aware Municipal was losing funds. Layne Bumgardner, NCUA's Regional Director for Region One, said that NCUA had also been generally aware of the credit union's difficulty with its networks and accounting, but said the credit union should be praised, not pilloried. "I definitely don't think this is time to throw stones," Bumgardner said. "You are always going to have a minority of people who abuse the situation," he added, "and you have to decide if you are going to plan for that minority or plan to serve the bulk of your membership," he said. "Given what they were up against, I think they did a terrific job." [email protected]