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Credit union lawsuit may hinge on letter from federal regulator

by: SPOTLIGHT FILE PHOTO - A federal lawsuit filed by a member of the St. Helens Community Federal Credit Union against the credit union faces another twist. A letter from the regulatory agency that oversees credit unions nationwide says credit unions cannot use mail in ballots at recall elections, as the St. Helens credit union did last fall.A legal opinion from the agency that oversees credit unions nationally indicates the St. Helens Community Federal Credit Union violated federal bylaws when it allowed mail-in ballots at a director recall election last year.

A spokesperson for the National Credit Union Administration says, however, the agency will see what happens with a federal lawsuit filed by a St. Helens credit union member against the credit union before it takes any action.

The letter from the NCUA's general counsel, Michael J. McKenna, is addressed to a lawyer consulted by St. Helens credit union member and Scappoose resident Steve Knebel. Knebel filed a federal lawsuit against the credit union in February, saying the credit union violated its bylaws when it allowed members to mail in their votes to recall or retain five of the financial institution's seven volunteer board directors.

He says McKenna's letter has validated his lawsuit.

“We basically won,” Knebel said. He plans to push for summary judgment — a decision from a judge — in the case. The credit union, meanwhile, filed a motion in early March to move the case from federal to state court.

In an e-mail, John Fairbanks, spokesperson for the NCUA, clarified the NCUA's stance.

"NCUA provided an answer to a particular question regarding interpretation of bylaws," he wrote. "We are aware this is being presented to a judge.  We will await the judge's decision and at that point determine if anything needs to be done."

In his lawsuit, Knebel argued that the credit union's own bylaws, drawn from bylaws provided by the NCUA, prohibited the mail-in ballots unless a mail-in option had been specifically requested by an absent credit union member. Instead, the credit union had sent out a mass mailing, providing all current members with the option to vote remotely.

Board Directors Lea Chitwood, Mike Hafeman, Richard Louie, Marty Boreevik and David Graham kept their seats, but the credit union would not release details about the number of votes cast for or against each director.

"No,” the letter from the NCUA reads, “the use of mail ballots in a director removal election violates the [Federal Credit Union] Bylaws.”

“The FCU Bylaws contemplate that members voting on a director's removal will be present at the meeting so they can hear the director's position on the matter before voting,” McKenna said in the letter. “If voting by mail were allowed in lieu of being present, members would be denied the opportunity to observe the director's demeanor, hear the director's defenses, and ask the director questions.”

He said the give and take of this sort of interaction “provides a director with more due process and better informs the membership.”

In an e-mail to the Spotlight, St. Helens credit union President and CEO Brooke Van Vleet would only say it was not the credit union's policy to comment on active or pending litigation.