Brandon v. National Credit Union Ass'n

115 F. Supp. 3d 678, 2015 U.S. Dist. LEXIS 90490, 2015 WL 4254910
CourtDistrict Court, E.D. Virginia
DecidedJuly 10, 2015
DocketCase No. 1:14-cv-1461
StatusPublished
Cited by2 cases

This text of 115 F. Supp. 3d 678 (Brandon v. National Credit Union Ass'n) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brandon v. National Credit Union Ass'n, 115 F. Supp. 3d 678, 2015 U.S. Dist. LEXIS 90490, 2015 WL 4254910 (E.D. Va. 2015).

Opinion

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

Petitioner, a former member and shareholder of the now-defunct Shiloh of Alexandria Federal Credit Union (“Shiloh”), brings this action pursuant to 12 U.S.C. § 1787(d)(3) seeking judicial review of the National Credit Union Administration’s (“NCUA”)1 denial of petitioner’s request for share insurance. Following revelations that Shiloh’s manager had been defrauding Shiloh, the NCUA placed Shiloh in receivership, and after determining that Shiloh’s internal records were unreliable due to the manager’s fraud and manipulation, undertook the task of reconstructing members’ share accounts to determine what amounts [680]*680each member should receive from the National Credit Union Share Insurance Fund (“NCUSIF”). The NCUA’s reconstruction of petitioner’s share .account revealed a negative final account balance of $75,041.96. The NCUA accordingly denied petitioner’s claim for share insurance. Petitioner' contends that NCUA’s reconstruction is inaccurate and that an accurate reconstruction would show that she is owed $19,432.58 in share insurance, the amount shown on her Shiloh account statement as of the date of liquidation. At issue on respondents’ motion for summary judgment, therefore, is whether the administrative record shows that the NCUA’s decision is not arbitrary, capricious, or otherwise not in accordance with law and is supported by substantial evidence. 5 U.S.C. § 706(2)(A).

I 2

The NCUA is tasked with (i) chartering and regulating federal credit unions and administering the NCUSIF and (ii) serving as the conservator or liquidating agent for federal credit unions that become insolvent. 12 U.S.C. § 1751 et seq. The NCUA Board is the managing body of the NCUA, consisting of three members appointed by the President. Id. .§ 1752a. When a federal credit union is liquidated, the Federal Credit Union Act (“the Act”) requires the NCUA Board to pay insured deposits “as soon as possible” but grants the NCUA Board discretion in resolving insurance claims, including discretion to “require proof of claims to be filed.” Id. § 1787(d).' Where there is a dispute with respect to' a share insurance claim, the NCUA Board “may resolve such disputed claim in accordance with regulations prescribed by the Board.” Id. § 1787(d)(3)(A). Petitioner, a resident of Virginia and a former Shiloh shareholder, has such a disputed share insurance claim.

The now-defunct Shiloh was chartered in 1993 and served members of the Shiloh Baptist Church and other persons living, working, worshipping, or attending school within a designated area in Alexandria, Virginia. AR 13. Shiloh was not a particularly sophisticated institution. It operated out of a church building and was only open during limited hours on Saturdays and Sundays. AR 14. Further, Shiloh did not maintain its own cash vault but instead banked with an independent financial institution, BB & T bank, AR 576. When a member wished to make a withdrawal from her account, she would request a check which was drawn from the Shiloh BB & T account. Id. Conversely, a member’s deposits into her Shiloh account were deposited into Shiloh’s BB & T account, with a notation on the deposit ticket noting to which member account the deposit was to be credited. Id.

Since at least 2009, Shiloh was managed by John Dupree, Jr. (“Dupree”). AR 13. Although the board of directors for a credit union is charged with the general direction and control of the credit union’s affairs, the Chairman of Shiloh’s Board stated that Dupree was actually the only person who in fact could operate Shiloh. [681]*681AR 14. Dupree kept two Shiloh computers at his personal residence, including one on which Shiloh’s financial database, Fed Comp.

On March 27, 2013, Dupree contacted an NCUA district examiner and stated that the December 31, 2012 Call Report he had submitted to the NCUA on Shiloh’s behalf incorrectly stated the total of non-member share deposits held by Shiloh.3 AR 13. In response, the NCUA assigned an examiner to visit Shiloh to determine whether this purported recordkeeping error was correct and to review Shiloh’s books and records. Id. The examiner was never able to meet with Dupree, however, because Dupree committed suicide on April 4, 2013, leaving a suicide note on a Shiloh computer confessing that he had defrauded the credit union. AR 15; 574 n. 1. An ensuing investigation revealed that Dupree accepted millions of dollars in unrecorded nonmember share deposits, embezzling millions of dollars for his own use and diverting other funds “to those in need.” AR 14-16, 571 & n. 1, 584. Dupree hid his fraud by manipulating members’ account balances with fictitious deposits in order to balance the credit union’s books and records. AR 14, 477-78.4 Besides his intentional manipulation, Dupree was often inaccurate and untimely in posting member transactions to their accounts. AR 14, 477-78. The NCUA eventually determined that Dupree’s fraud had cost the credit union more than $9.7 million. Answer ¶ 2.

On April 12, 2013, the NCUA Board found Shiloh to be insolvent. AR 9-11. Accordingly, pursuant to 12 U.S.C. §§ 1766(b)(1) and 1787(a)(1)(A), the NCUA Board placed Shiloh into involuntary liquidation, revoked its charter, and appointed itself as Shiloh’s Liquidating Agent. Id. The NCUA Board further appointed agents of the liquidating agent (“ALA”), who informed Shiloh members of the insolvency and liquidation by mailing letters informing account holders that if their account balances were over $500, they were required to complete and return an enclosed “Member Confirmation and Affidavit” form in order to claim any remaining balance. AR 35-36. This letter enclosed a statement, drawn from Shiloh’s internal records, showing the member’s account balance as it stood on the date of liquidation. Petitioner’s statement reported that she had a balance of $19,432.58. AR 45. The statement also showed that petitioner had purchased a $10,000 share deposit (which is analogous to a Certificate of Deposit or “CD”) in November 2008 and that this share deposit was transferred upon its maturity to petitioner’s share account in November 2009.5 The account [682]*682statement also reflected two outstanding loan balances of $2,753.27 and $29,792.66.6

On May 1, 2013, petitioner returned her “Member Confirmation and Affidavit” stating that she did not agree with the statement of her share or loan balances at liquidation. AR 49-56. Petitioner’s letter stated that the member account statement she received did not accurately reflect $200 weekly deposits ■ made automatically from her paycheck and did not reflect her purchase of a $10,000 share deposit. AR 51. Petitioner did not provide her own representation of what her' account balance should have been, but simply challenged the number provided in the share account statement provided by the ALA.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
115 F. Supp. 3d 678, 2015 U.S. Dist. LEXIS 90490, 2015 WL 4254910, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brandon-v-national-credit-union-assn-vaed-2015.