The Wall Street Journal (paid subscription) is reporting that law firms hired by the National Credit Union Administration (NCUA) may experience a huge payday.
NCUA last year hired two law firms, Kellogg Huber Hansen Todd Evans & Figel PLLC and Korein Tillery LLC, on contingency arrangement to recover losses incurred by failed corporate credit unions from their purchases of mortgage-backed securities from investment banks prior to the 2008 financial crisis.
"The law firms were hired under what is known as a contingency arrangement, which would give them one-fourth of any judgment or settlement, according to congressional investigators who reviewed the contracts. It could mean a payday of hundreds of millions of dollars for the firms."
President George W. Bush signed an executive order in 2007, titled "Protecting American Taxpayers from Payment of Contingency Fees," prohibiting federal agencies from entering into these arrangements with outside attorneys. The order was left unchanged by President Barack Obama.
However, the agency claims that it doesn't have to follow the executive order "because it is an independent agency acting as a liquidator of failed credit unions."
House Oversight Committee Chairman Darrell Issa (R., Calif.) requested that NCUA's Inspector General investigate whether the executive order applies to the agency.
Representative Issa said the high attorneys' fees hurt customers because it reduces the amount of any funds recovered from the investment banks, which would be used to replenish the Temporary Corporate Credit Union Stabilization Fund, created by Congress in 2009 to pay for the losses of failed corporate credit unions.
Credit Union Journal (paid subscription) is reporting that of the $170 million in out-of-court settlements NCUA has recovered to date from Wall Street banks, "only $127.25 million flowed into the estates of the failed credit unions.”
The Wall Street Journal notes that NCUA acknowledged that the selection process of the law firms was not public.
A Justice Department spokeswoman commented for the Wall Street Journal article that the Justice Department was "unaware of any other federal agency that has outside firms on contingency fee contracts."
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Dave M gets to retire with his pension while the rest of us cu folks foregoe ours and keep working to replace the billions of hard earned member money lost during his reign. Another $40 million, what does he care, he's got his money.
ReplyDeleteIt's good to be the king. No accountability.
NCUA to Issa, "drop dead". "the rules are for everyone else but us, we're the NCUA. We brutalize our flock and blame everyone else, cause we can."
ReplyDeleteCredit Unions to Issa- "do your job and deal with this agency. They have bungled corp credit union supervision that led to losses that they're lying about and then fed law firms a juicy deal. All the while they've jailed credit unions that try to change charter and leave to pay taxes. Call one OF YOUR CONSTITUENTS and ask them how their charter change process worked under this agency. Call tech cu CEO Barbara Kamm. You want to do some real good work? Check into that and other charter change attempts...like HarborOne, First Basin"