After it became the nation's first state-chartered financial institution to exclusively serve the pot industry in 2014, Fourth Corner Credit Union attracted a lot of headlines from the mainstream and trade press that excitedly anticipated its grand opening. But the much-celebrated Denver-based Fourth Corner CU is still not open for business, and most recently, it suffered yet another major setback that will keep the cannabis cooperative closed into the near future.

In late June, a federal judge dismissed the credit union's lawsuit against the NCUA after the independent federal agency rejected 4CCU's application for federal share deposit insurance. U.S. District Court Judge Raymond P. Moore in Denver ruled Fourth Corner CU's insurance application was moot because the credit union fundamentally changed its business model after filing the original insurance application in September 2014. Judge Moore also admonished 4CCU for attempting to "paint gloss on an ugly situation, but all of its efforts miss the mark." His criticism seemed to be based on the credit union's arguments that it did not fundamentally change its business model, contending that it will serve marijuana related businesses whenever federal prohibition is finally lifted, but in the meantime, the credit union said it planned to follow the law and serve legal cannabis supporters.

"As for plaintiff's (4CCU) contention that is has always planned to follow the law, that is all well and good, but it does not change the fact that plaintiff will no longer serve marijuana-related businesses until it becomes legal to do so under federal law," Judge Moore wrote in his six-page order and opinion. "To the extent that fact could be described as merely a clarification of plaintiff's business, it is still a substantial change given that plaintiff originally planned to serve marijuana-related businesses."

Recommended For You

Lawyers who represent 4CCU did not respond to CU Times request for comment. What's more, Deirdra A. O'Gorman, 4CCU's president/CEO, also would not comment about losing a long, and undoubtedly expensive legal battle with the NCUA to secure federal share deposit insurance, which presumably would have been the final big hurdle to open its doors for business.

And while the credit union said earlier it would discuss private deposit insurance after securing conditional approval for a master account from the Federal Reserve Bank of Kansas City, in reality that was never an option because Colorado does not recognize private insurance for state-chartered financial institution deposits, according to the Colorado Bankers Association and other sources. What's more, 4CCU also said in court documents that the Colorado regulator approved credit union's state charter conditioned upon it obtaining federal share deposit insurance from the NCUA.

When seeking clarification about 4CCU's statements about private insurance, O'Gorman said the credit union is no longer discussing private insurance with Colorado regulators.

"4CCU is still working with Colorado Division of Financial Services (DFS) before we are able to proceed with any dialog with the NCUA," O' Gorman said. "With Colorado DFS—our main goal is to provide an updated and workable business plan to them based on our current field of membership."

She indicated that only after the new business plan is finalized and approved by Colorado regulators would 4CCU be "able to proceed with any dialog with the NCUA."

But she would not say if that means 4CCU plans to reapply for federal share deposit insurance. In court documents, however, the credit union said that it is reluctant to reapply because the process could take up to two years.

"Sorry I don't have more interesting news to share….our next steps and timeline are all predicated on how things go with the DFS," O'Gorman said.

4CCU secured its state charter in 2014 to serve MRBs, or marijuana-related businesses that grow and sell cannabis to adults for medicinal or recreational use.

But the credit union ran into two major roadblocks from the NCUA, which declined to approve 4CCU's application for federal deposit share insurance because of the federal agency's concerns about the unresolved inherent risks of the credit union's business model. In addition, the Federal Reserve Bank of Kansas City would not approve the credit union's master account to process checks and electronic payments. That led 4CCU to file lawsuits against the federal agencies in the summer of 2015.

It wasn't until February 2 of this year when the FRB-KC agreed to issue a master account to 4CCU but only after it meets certain conditions, including the most important condition of obtaining federal share deposit insurance from the NCUA or primary deposit insurance from a private deposit insurance provider in a manner acceptable to the Colorado DFS.

FRB-KC also required 4CCU to amend its bylaws to state that it would not service marijuana-related business until pot became lawful under federal law, and that it would implement appropriate controls and enhanced due diligence to ensure that it does not provide financial services to MRBs, which includes "plant-touching businesses or persons with ownership in those businesses."

Instead, 4CCU said it planned to serve supporters of legalization such as ancillary businesses that support the pot industry, trade associations, and approved charities.

But in some instances, 4CCU may run into some challenges in serving supporters of legal cannabis.

Tyler Beuerlein explained that FinCEN's guidance considers anyone who makes a dollar from the pot industry is considered a marijuana related business. He is vice president for business development of Hypur, a Scottsdale, Ariz.-based provider of financial software products, which include proactive compliance tools, automated due diligence tools and electronic payment alternatives to debit and credit cards.

"All the compliance burden kicks in the second you bank anybody deriving any amount of income from that industry," Beuerlein said. "We've seen a number of attorney accounts closed — trust accounts even — because they've taken in money from cannabis operators."

In less than two weeks after getting the conditional approval from FRB-KC, the credit union asked a federal judge to order mediation between the NCUA and the credit union to negotiate a resolution for securing federal share deposit insurance.

"NCUA has indicated that now that 4CCU has been conditionally granted a master account, 4CCU can voluntarily dismiss its case and re-apply for federal deposit insurance, but NCUA will not provide any assurance that it will timely act on a second application or that it will follow its own regulations," the credit union argued in court documents. "Further, there is no need for 4CCU to dismiss its case or re-apply at 4CCU's business plan and its mission remain substantially unchanged; that is to bring fully legal banking to the cannabis and hemp industries. The NCUA has indicated it will reconsider its denial in light of the FRB-KC's grant of the conditional master account."

The NCUA, however, quickly responded to 4CCU's request for a federal court mediation order. "Because Plaintiff (4CCU) has repeatedly stated in court filings that it no longer intends to serve marijuana-related businesses unless it becomes lawful to do so under federal law, Plaintiff's application for insurance and the Defendant's (NCUA) denial of the same no longer present a live case or controversy," the NCUA said in court documents. "Accordingly, this court lacks subject matter jurisdiction over Plaintiff's claims and must dismiss this case as moot."

Although 4CCU lost it hard-fought court battle with the NCUA, the credit union may be able to open for business eventually after the midterm elections.

Paul Armentano, deputy director for the National Organization for the Reform of Marijuana Laws in Washington, D.C., said the prospects will turn brighter for federal marijuana reform laws to pass if the Democrats take over Congress.

Regardless of what happens in November, public support for federal cannabis reform legislation is expected to keep growing.

"I think ultimately what's driving the change in public opinion is that this question of legalizing and regulating marijuana has gone from theory to practice," Armentano said. "This change is happening in the states. Twenty percent of the public now lives in a jurisdiction where the adult use of marijuana is legal. Over a majority of states have regulated medical marijuana. They know that regulations works. They know the sky hasn't fallen. In fact, what we see in states like Colorado and Washington is that there's greater public support now for these policies than there were when these policies were initially enacted. I think in many ways federal politicians were behind the curve and even taken by surprise with regard to the support that existed among their constituents with regard to this issue."

NOT FOR REPRINT

© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Peter Strozniak

Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.