The federal agency declined to hand over the non-public documents because the BHFCU members’ group, led by Kathy Wright and Steve Snider, did not comply with regulations – otherwise known in legal circles as the NCUA’s Touhy regulations. The regulations govern the process for obtaining nonpublic records or testimony from NCUA employees or persons not employed by the federal agency for legal proceedings.

The regulations require a written request for the nonpublic records to the NCUA’s general counsel. The written request must include specific details such as the legal proceeding's caption, docket number, a copy of the complaint, a description of the records or testimony sought, and an explanation of their relevance.

However, Judge Stephens, who granted the BHFCU members’ motion to compel the NCUA to hand over the documents, indicated in his January ruling that the NCUA regulations were inconsistent with federal Rule 34 that governs the process by which parties in a civil lawsuit can request and obtain access to various forms of evidence from each other.

“Such a regulation is plainly inconsistent with Rule 34 and cannot be enforced,” Judge Stephens wrote in his decision. “To allow a federal regulation issued by an agency to effectively override the application of the Federal Rules of Civil Procedure and, in essence, divest a court of jurisdiction over discovery, the enabling statute must be more specific than a general grant of authority as found here.”

Outside of the NCUA nonpublic documents ruling, Judge Stephens also granted the BHFCU members’ access to the credit union’s documents regarding merger expenses, payments, detailed monthly financial statements, missing board or other meeting minutes, police reports and video recordings of meetings.

The Ohio judge also denied the BHFCU members’ motion to compel other unspecified documents and routine audit reports. He also deferred rulings on other discovery requests regarding specific messaging and other communications among the credit union’s board members.

This latest legal action stems from May 2023 when the BHFCU members’ group filed a lawsuit against the credit union’s board members, supervisory board members and others to block the proposed consolidation with MyUSA Credit Union. A month later, an Ohio Magistrate Judge granted the BHFCU members a preliminary injunction that blocked and forced the cancellation of the consolidation, even after the NCUA's conditional approval and after the majority of BHFCU members voted in favor of merging with MyUSA.

In January 2024, a state judge granted the 15 members a default judgement, which means they won their case outright. Since then, the case has been in a discovery stage as part of the mediation process to eventually reach a settlement agreement.

A year later, on Jan. 10, the NCUA placed BHFCU into conservatorship because of unsafe and unsound practices. The credit union has not turned a profit since 2018 and its financial condition has not improved. From 2019 to 2024, BHFCU has posted five-figure and six-figure losses. At the end of last year, the credit union recorded a loss of more than $260,000 and a net worth of 5.89%.

READ MORE: NCUA’s motion to deny disclosure of documents; and Judge’s order for NCUA to disclose documents.

Contact Peter Strozniak at [email protected].