ALEXANDRIA, Va.–An investigation by NCUA staff of the kinds of compensation paid to CU senior execs and board members as the result of mergers turned up some questionable practices.
During the Q&A with the NCUA board members following a proposal calling for greater disclosures in mergers, agency staff were asked about the types of bonus compensation paid to executives and volunteers at CUs that were acquired that they had uncovered in examining merger agreements.
Staff told the board that in “75% to 80%” of mergers they had found “significant merger-related compensation” being paid to people at the credit union that was being acquired, nearly all of which was kept from members when voting on the merger.
In one case, staff said, it found a total payout in the low-seven figures paid to 18 people at a credit union, with the bulk of that money going to four people. In another case, an acquiring credit union discovered after the fact that the board of the acquired CU had cut a deal in which each of them were to be provided with expensive season’s tickets to a local football team’s games for a three-year period.
NCUA Board Member Rick Metsger asked staff about how some credit unions have worked to “obfuscate” payments being made to officials at the acquired CU, and staff responded that one common method is that instead of having a clearly articulated dollar amount being paid, benefits are paid out in a different fashion, such as a split-dollar life insurance plan.
At another credit union, staff said it found the merger agreement called for the CEO of the acquired CU to be paid for a guaranteed five years of employment, even if at any point that CEO quit or the acquiring CU terminated him.
“So he could work for one day, quit, and get the full five years,” staff said.