Renz quoted Yolles as saying in an Aug. 8 letter that he denied the credit union's appeal because the exam was "consistent with NCUA policies and practices." Renz said Yolles also wrote in the letter that because the exam followed NCUA policy, he did not find the report or CAMEL coding to be "retaliatory in nature."

Renz said while some findings from the credit union's 2011 exam were justified, others were inaccurate, and those inaccurate findings were used as justification to lower the credit union's CAMEL score.

"I understand that the burden should be on us, but given the weaknesses in the appeals process, they're not even looking at the original issues at this point," Renz said.

Attorney Bruce Jolly, of the Oakton, Va.-based law firm Reed & Jolly PLC, said he's never had a credit union client take an exam appeal all the way to the SRC but said as he understands the appeals process, the NCUA is right. He said according to the Administrative Procedures Act, the Commodore Perry faces "an enormous burden of proof" to convince the SRC that Yolles "abused his discretion" when he decided to deny the appeal.

"The whole controversy around the examiner's approach and attitude, it literally isn't on the table," Jolly said. "But, that's exactly the way the exam appeal process is set up."

Jolly said the question facing the SRC isn't whether or not Yolles reviewed the credit union's evidence, or if he would have changed his mind had he reviewed it. Instead, the committee will decide whether or not Yolles had enough evidence to arrive at his decision, and whether or not he abused the appeals process when he denied CPFCU's appeal.

"They certainly have the right to argue that [Yolles] couldn't have made the right decision because they have all this evidence he didn't review," he said.

However, NCUA Executive Director David Marquis told Credit Union Times that SRC Chairman Joy Lee will, indeed, consider CPFCU's evidence that the examination findings were incorrect. If Lee and her committee decide any exam finding is "questionable and not sustainable," it can be overturned, Marquis said. Such a finding may or may not be enough to warrant an improved CAMEL score.

"It depends upon the rest of the findings. Those are all things (the SRC) will have to review," he said.

CPFCU claims its examiner retaliated by reporting inaccurate exam findings because management complained to the NCUA that he sexually harassed and bullied CPFCU employees. The supervisory examiner who took the complaint passed it along to the NCUA's Office of Inspector General per NCUA rules, and the OIG's office immediately investigated the complaint, interviewing the examiner before CPFCU's exam was complete.

The OIG backed up the examiner, saying Oct. 4 it did not find evidence of retaliation.

Regardless of the outcome, Jolly said by taking its appeal to the SRC, "the credit union has helped shine a light on an entire set of processes that a credit union encounters when it confronts what it considers to be a bad exam."

Renz also told Credit Union Times the methodology behind how NCUA examiners assign CAMEL codes and risk scores is also unclear. In a Sept. 25 letter from Yolles to CPFCU further clarifying the reasons for the appeal denial, Renz said Yolles wrote "the Examination Overview is not intended to be a justification of the risk ratings or the CAMEL codes."

"It is my understanding that the Administrative Procedures Act requires a reasonable explanation for these types of ratings and codes to prevent arbitrary and capricious findings, and if a Regional Office of the NCUA is stating that the only part of the examination report that discusses these codes is not the explanation, then what is?" he said.

Yolles did provide some justification for the codes in the Sept. 25 letter, Renz said, but he called them "weak, irrelevant and outdated"; specifically, references to examination findings in 2010 and 2009. Furthermore, Renz said Yolles' explanation, which he declined to make public, differ from the exceptions listed on the 2011 exam overview and resulting Document of Resolution.

Marquis said if a credit union receives a DOR, it should contain the exam findings that would lead to a weaker CAMEL score. He added that the exam overview is intended to be more of a "broader discussion" of exam findings, conclusions and solutions.