January 9, 2009

XXXXX

XXXXX

XXXXX

Re: Removal of Director.

Dear XXXXX:

You have asked if your removal from your Federal Credit Union's (FCU)
board of directors was appropriate. No, removal of a sitting director
requires a membership vote at a special meeting held for that purpose. A
director's seat may be declared vacant by the board, but only if a
director fails to attend regular board meetings or otherwise fails to
perform his or her duties as a director.

In your letter, you indicated you were duly elected to the board in 2003
and have been twice re-elected to office. Recently, your director's seat
was declared vacant at a special meeting of the board of directors based
on allegations that included disruptive activities, breach of board
confidentiality, divisive behavior, and breach of fiduciary duty. You
also state you requested that a member of the supervisory committee
attend the meeting, but the board chair denied this request. In support
of the board's action, the credit union's general counsel relied on
Article XVI, Section 3 of the FCU Bylaws.

While Article XVI, Section 3 of the FCU Bylaws allows for the removal of
a director, the provision requires "\[t\]he affirmative vote of a
majority of the members present at a special meeting called for the
purpose . . . ." Under this provision a vote at a special meeting of the
members, not the board of directors, is required. The director must also
be given the opportunity to be heard.

Article VI, Section 8 of the FCU Bylaws allows a board of directors to
declare a seat vacant. A director may only be removed under this
provision, however, if the director fails to attend regular meetings of
the board (for 3 consecutive months, or 4 meetings within a calendar
year), or otherwise fails to perform any of the duties as a director.
Voting in the minority, abstaining, or disagreeing with or opposing the
views of other board members do not constitute a failure to perform the
duties as a director. NCUA encourages a full, healthy, and robust debate
among FCU boards of directors.

The circumstances described in your letter appear to reflect
disagreements among board members, rather than a failure to perform your
duties as a director. A board of directors cannot use the vacancy
provision to circumvent the rights of the members to vote on a
director's removal. If members of a board of directors believe a fellow
director is acting inappropriately, they may bring the issue to the
supervisory committee. It is the supervisory committee that has the
authority to vote to suspend a director. The supervisory committee vote
must be unanimous and the effect is to suspend the director until a
special meeting of the members is called; the supervisory committee must
call a special meeting of the members to act on the suspension. FCU
Bylaws, Article IX, §5. The special meeting must be held no fewer than 7
days and no more than 14 days after the director's suspension.
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Absent an affirmative membership vote at a special meeting, a director
cannot be removed from membership on the board of directors. Given the
nature of the allegations you described were brought against you, our
view is the board of directors did not have permissible grounds for the
board to declare your seat vacant.

You also asked if minutes must be kept of executive committee meetings.
Yes, it is the duty of the director who serves as secretary for the
board of directors to prepare and maintain a record of all meetings of
members and directors. FCU Bylaws, Article VII, §9. Because directors
make up the executive committee, FCU Bylaws, Article VII, §10, minutes
must be kept of all meetings of the executive committee. Also, as a
director, all credit union records must be available to you provided you
have a proper purpose for obtaining the records. FCU Bylaws, Article
XVI, §6.

Sincerely,

/S/

Sheila A. Albin

Associate General Counsel

GC/PWY:bhs

08-1229 Redacted

cc: Director, NCUA Region XXXXX

XXXXX, Chairman

XXXXX Federal Credit Union