Senior management is the among the first casualties at Sperry Associates Federal Credit Union as the cooperative attempts to correct a number of troubled capital, operational and lending issues recently ordered by the NCUA.
The $345 million Sperry in Garden City Park, N.Y., announced Sept. 20 that Dan Capece, its interim president, and Sandy Albert, a human resources consultant, were no longer working at the credit union, effective Sept. 15.
"The board has enacted this change to improve the credit union's operations for its membership base; as the organization moves forward, the board is focused on transforming its management team," said Sperry in a statement.
Sperry's board of directors voted unanimously Sept. 14 "to cease utilizing the services" provided by Capece and Albert. While the credit union undergoes a search for their replacements, Jim Duffett, vice president, and Rob O'Hara, director, will lead the management team. Capece had served as interim president for more than six years, according to Duffett. Albert had been with Sperry for more than seven years.
When asked for more details on the removal of Capece and Albert, Duffett responded again with the Sept. 20 statement mentioned above.
"We are grateful for the services that Mr. Capece and Ms. Albert provided to our members and staff during their tenure at Sperry," said Board Chairman John Kumpel.
On May 28, the NCUA entered into a letter of understanding and agreement with Sperry. After an exam, the regulator found that the credit union's net worth was below its risk-based net worth requirement as of Dec. 31, 2009 and therefore, considered undercapitalized. The NCUA said Sperry must charge off $3.1 million in nonperforming assets, which would lower the credit union's net worth to approximately 5.17% as of March 31.
Sperry was required to correct several problems, including credit losses associated with three private-label collateralized mortgage obligations. The NCUA said the credit union had not been performing proper due diligence over its participation lending program as evident by the large losses. It also granted loan modifications without a board approved policy or managerial procedure in place, the agency discovered.
The NCUA said Sperry had also not managed its balance sheet to comply with its stated interest rate risk tolerances in its policies. Liquidity risk tolerance levels, the effectiveness of its disaster recovery program, possibly putting members at risk because of a possible ineffective information security and technology program and lack of due diligence on third-party vendor relationships were also issues that needed to be addressed. Sperry has not had the effectiveness of its Bank Secrecy Act program tested since June 2008, the NCUA said.
Meanwhile, Sperry is looking to recoup some of its loan losses. It filed a lawsuit Aug. 20 against the defunct Eastern Financial Florida Credit Union to recover failed participation loans. The deals involved several properties with at least $9 million of the loans bought and sold by Sperry.
In April 2009, EFFCU was placed in conservatorship by the NCUA and merged with Space Coast Credit Union in June last year. Sperry has named Space Coast, CU Business Capital LLC, which underwrote the participation loans, and CUBC's successor, Small Business America in Linthicum, Md., in the suit. Duffett would not comment on the suit, saying, "This is a current legal matter and I am unable to discuss the case."
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