BISMARCK, N.D.–North Dakota’s credit unions say NCUA is withholding more than $10 million owed them as part of the resolution of the failed corporate credit unions, and the state’s two senators are also pressing the agency to return the funds.
The Dakota Credit Union Association says the funds are being withheld over a “technicality” being cited by NCUA, with DCUA President/CEO Jeff Olson saying the agency has “arbitrarily decided to confiscate these assets from everyday North Dakotans…”
Moreover, Olson is raising questions over other statements made by NCUA and actions it took related to North Dakota’s state regulatory agency.
At the heart of the issue is the former Midwest Corporate Credit Union, which began its life as North Dakota Central CU in 1942.
The Background
In their letter to NCUA, North Dakota Sens. Kevin Cramer and John Hoeven stated that prior to the financial collapse in 2008–2009, the largest corporate credit union in the United States U.S. Central Federal Credit Union (U.S. Central), which provided services to other corporate credit unions, including Midwest Corporate, acting as a "corporate credit union's credit union." In early 2009, in response to investment losses incurred at U.S. Central, NCUA implemented the Corporate Stabilization Program and placed U.S. Central into conservatorship, the letter states.
“The investment losses at U.S. Central exceeded their Member Contributed Capital, which led to the extinguishment of nearly all the contributed capital. Under the corporate restructuring plan, corporate credit unions were required to either recapitalize, merge, or liquidate. At the time, credit unions in North Dakota chose not to re-capitalize Midwest Corporate or merge with another corporate credit union,” according to the letter.
On April 29, 2011, Midwest Corporate officially closed its doors.
According to the Dakotas Credit Union Association and the senators’ letter to NCUA, prior to the dissolution of Midwest Corporate, in October 2010, NCUA issued Midwest Corporate a claim receipt for Member Contributed Capital represented by Paid-In Capital (PIC) totaling $3.3 million and Membership Capital Accounts (MCA) totaling $10,448,323.99.
The association and the senators said the claim receipt states 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.”
Checks Not in the Mail
But North Dakota’s 30 credit unions haven’t received the funds they are owed, according to the DCUA and the senators’ letter.
“Recently, in its role as liquidating agent of the former corporate credit unions’ asset management estates, the NCUA has made three rounds of distributions to membership capital shareholders of the former Members of United, Constitution, and U.S. Central corporate credit unions,” the letter reads. “Last year, in 2021, the NCUA board authorized the 100% reimbursement of ‘MCA’ and 3% of ‘PIC.’ This past February, the NCUA announced a $359.2 million distribution to more than 1,000 membership capital shareholders of the above former credit unions. This fourth distribution by the NCUA will have distributed $1.8 billion to former membership capital shareholders and $209.8 million in dividends to shareholders.”
The letter continues, “While U.S. Central Federal Credit Union members have received payouts under the Corporate System Resolution Program, Midwest Corporate, which was part of the U.S. Central credit union network, was notified that it was ineligible to receive reimbursement since the corporate entity was dissolved in 2011 and the legal existence of the charter was officially canceled three years later.”
Agency is Aware of Issue
The letter acknowledges that NCUA is aware of the issue and has responded by saying the former capital holders of Midwest Corporate may be eligible to make an independent claim to the assets of U.S. Central. The senators called on NCUA to “work through the claims process to ensure all proper claims are satisfied to the greatest extent possible, and that these recovered assets are returned to their rightful owners of these recovered assets.”
In comments published on the Dakotas Credit Union Association website, DakCU CEO Jeff Olson said the “big question” is whether NCUA is keeping the $10.5 million owed to the credit unions or whether it has been distributed to other surviving corporates in other parts of the country?
Additional Questions
Olson is raising other questions, we well.
“…We know that the U.S. Central liquidating agent, the NCUA, reached out to the North Dakota Department of Financial institutions (ND DFI) to give them a ‘heads up’ that reimbursement checks were about to be released to North Dakota credit unions. We know this as the ND DFI deputy commissioner shared this information with us. ND DFI then informed the liquidating agent that the corporate had been liquidated years ago,” Olson wrote. “Clearly, the NCUA was aware that the corporate was federally charted, and ND DFI had no regulatory oversight.
“Why would the agency reach out to the state regulator if they weren’t about to send out reimbursement checks to North Dakota credit unions? What would have happened if the deputy commissioner would have simply said, ‘Send us the checks and we’ll get them out’?” he continued. “Why couldn’t the ND DFI serve as the ‘legal entity’ to pay these claims to the rightful owners since they served as the liquidating agent for Midwest Corporate?”
Olson added, “North Dakota credit unions are being disregarded as the National Credit Union Administration distributes recovered capital shares to credit unions across the country,” said Olson.
Olson’s full comments can be found here.
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