Losses & Troubles for Beleaguered Municipal Credit Union Continue to Mount

The beleaguered $3 billion Municipal Credit Union in New York City posted a net income loss of $82.7 million at the end of last year’s fourth quarter while its average employee salary and benefit costs have continued to be extraordinarily high at $310,481 compared to a peer average of $83,322, according to NCUA financial performance reports.

What’s more, a landlord that leases office space for one of the six branches that MCU plans to close on Friday filed a lawsuit against the credit union, claiming it failed to meet conditions to nullify the lease agreement. Court records showed the NCUA did not notify the landlord that it was pulling out of the lease agreement until Dec. 27, 2019, after determining the lease was “burdensome,” and that canceling the lease would “promote the orderly administration of the credit union’s affairs.”

However, the landlord SPA 79 D L.P. in Hauppauge, N.Y., is challenging the constitutionality of a provision in the Federal Credit Union Act, 1787(c)(4), which allows the independent federal agency, as the conservator of MCU, to void the lease and not be held liable for any damages. The landlord argued this provision violates the Fifth Amendment that prohibits depriving life, liberty or property without due process of law and taking private property for public use without just compensation.

Late last year, MCU announced it planned to close six branches. Reportedly, MCU employees presumably at those branches were offered a buyout, according to The Chief Leader, a longtime weekly news outlet that covers New York City’s government and civil servants. The Office and Professional Employee International Union Local 153,  which represents 450 tellers, loan officers and collectors, was notified by the credit union that union members had until Dec. 19 to opt into the buyout, according to the publication.

The OPEIU reported in its newsletter that the bargaining agreement between the union and MCU expired on Jan. 14, 2019 and that the six bargaining sessions failed to produce a new labor agreement. One of the main sticking points was what the labor union called a “seriously low wage offer,” made by MCU. The credit union also was demanding the elimination of a pension plan to be replaced by a 401(k) program and new production quotas for union employees.

The NCUA declined to comment when reached Wednesday. MCU did not respond to CU Times‘ request for comment. OPEIU also did not return messages requesting comment about the reported MCU employee buyouts.

Although MCU’s full-time labor force declined from 671 at the end of December 2018 to 517 at the end of December 2019, its average cost of salaries and benefits for a full-time employee has surged from $120,436 at the end of December 2018 to $434,688 in the 2019 second quarter, $369,498 in the third quarter and $310,481 in the fourth quarter.

Over the last three quarters, MCU’s net income losses have declined from a high of $123 million at the end of last year’s second quarter, $113 million in the third quarter and $82 million in the fourth quarter. During the same three quarters, the credit union’s net worth was 3.47%, 3.87% and 4.74%.

Its capital position is $182 million.

Although MCU lost more than 17,000 members (581,533 in June 2018 to 563,956 in Sept. 2019), the credit union has managed to increase its membership by 8,357 for a total of 572,313 by the end of last year.

MCU has been in conservatorship since May 2019, about a year after a federal investigation revealed massive fraud and corruption at New York City’s oldest credit union, which has so far led to the conviction of its former CEO Kam Wong, who is serving a five-and-a-half-year prison sentence, a guilty plea from former supervisory committee member Joseph Guagliardo and criminal charges against a former MCU board chair, who pleaded not guilty to conspiracy to obstruction of justice for falsifying records and obstruction of justice to tampering with a witness, victim or informant connected to a federal investigation.

Earlier this month, U.S. Attorney Geoffrey S. Berman for the Southern District of New York hinted in a prepared statement that there may be charges filed against others who may have been involved in the MCU fraud and corruption case.