Dakota Credit Union Association CEO Blasts NCUA
Jeff Olson says $10.5 million in recovered assets from the failed Midwest Corporate FCU belong to 30 North Dakota credit unions.
Jeff Olson, president/CEO of the Dakota Credit Union Association, is blasting the NCUA for failing to pay 30 North Dakota credit unions $10.5 million in recovered assets of Midwest Corporate Federal Credit Union, which was dissolved in 2011 following the financial crisis.
“North Dakota credit unions are being disregarded as the NCUA distributes recovered capital shares to credit unions across the country,” Olson wrote in an email to the CU Times on Sunday afternoon. “In all, Dakota credit unions, and ultimately their members, are being deprived of more than $10 million as the NCUA cites a ‘technicality’ that precludes North Dakota from the settlement.”
That “technicality,” according to Olson, was the NCUA’s claim that since Midwest Corporate was liquidated, the federal agency has no legal path or legal entity to pay back these recovered assets to North Dakota credit unions.
Olson’s email came with a 1,140-word statement that he tagged as an op-ed. His email also came with a joint letter of support for the association from North Dakota Republican Senators Kevin Cramer and John Hoeven, which was addressed to NCUA Chair Todd Harper. In that letter, the senators wrote that it was their understanding that the Dakota Credit Union Association has had discussions with the NCUA about this matter. They cited a June 9 NCUA letter that indicated the credit unions may be eligible to make an independent claim and that the NCUA notified the Dakota Credit Union Association of the appropriate claims process.
The NCUA was unable to respond by CU Times’ Monday deadline.
On Monday, the NCUA announced a $313 million distribution to more than 400 membership and paid in capital shareholders of the former Members United, Constitution and U.S. Central corporate credit unions.
U.S. Central provided services to other corporate credit unions, including Midwest Corporate.
The NCUA also said it will distribute $82 million in dividends to more than 1,100 shareholders of Southwest Corporate. The NCUA completed capital distributions to Southwest Corporate capital holders last year.
In October 2010, the NCUA board – in its role as liquidating agent for failed corporate credit unions – issued Midwest Corporate a claim receipt for Member Contributed Capital representing the value of “paid in capital” (PIC) and Membership Capital Accounts (MCA) balances as of Nov. 20, 2008.
For North Dakota credit unions, that claim receipt was worth $10.5 million for MCAs and $3.3 million in PIC. The claim receipt stated that it enables Midwest Corporate owners “to share pro rata in the net proceeds, if any, to the extent of the PIC and MCA balances as of the record date” and “no further action is required on their part to file or activate a liquidation claim,” according to Olson’s letter.
“Now, we can fast forward to April 2021 when the NCUA board authorized the 100% reimbursement of MCA and 3% of PIC,” Olson wrote. “Yet, North Dakota credit unions received letters stating that since Midwest Corporate dissolved in 2011 and the legal existence of the charter was officially canceled three years later, Midwest Corporate members were ineligible to receive reimbursement. The NCUA claims that since the corporate was liquidated, they have no legal path or a legal entity to pay back these recovered assets.”
Olson then asked the question: What happens to these recovered assets after liquidation?
“Does the NCUA just get to keep the $10.5 million in MCA assets that were owned by North Dakota credit unions? Have they been distributed to other surviving corporates in other parts of the country?” he asked. “These are fair and important questions to ask. The MCA and PIC accounts were investments owned by North Dakota credit unions, entities that still exist or have merged into other credit unions, many due to the aftermath of the financial crisis. Why shouldn’t these recovered assets be returned to their rightful owners? The NCUA knows exactly who made these investments and what losses each credit union was required to record due to the U.S. Central failure. Does the NCUA, the liquidating agent of U.S. Central, have the authority to just take Midwest Corporate’s share of assets and distribute them to whomever? Or, worse yet, does the NCUA get to keep that money? If so, what is the legal basis for this authority?”
Olson said the association along with credit unions across the state are working closely with Senators Cramer and Hoeven to convince the NCUA to release these recovered capital assets.
“The NCUA needs to do the right thing and disburse these recovered assets to the rightful owners,” Olson wrote. “Since credit unions are member owned financial cooperatives, the NCUA has arbitrarily decided to confiscate these assets from everyday North Dakotans who are members of these institutions. The 30 surviving credit unions in North Dakota that lost their capital investments deserve no less – and neither do their members.”