Opinion ID: 783298
Heading Depth: 3
Heading Rank: 2

Heading: Prohibition Orders Under the Federal Credit Union Act

Text: 31 Federal credit unions are governed by the Federal Credit Union Act (FCUA), 12 U.S.C. §§ 1751-1795K, and administered by a federal agency, the NCUA, id. § 1752a(a). The NCUA is managed by the Board. Id. The FCUA authorizes the Board to issue orders barring a credit union officer or employee from further participation in the affairs of a federally insured credit union. Id. § 1786(g). A prohibition order must be buttressed by a finding that a credit union official (1) is guilty of misconduct; (2) that has an adverse effect on the credit union; and (3) evinces personal dishonesty or unfitness. Id. (the prohibition test). 32 &#x2022; The misconduct element is satisfied when it is found that a party has engaged or participated in any unsafe or unsound practice, or committed or engaged in any act, omission, or practice which constitutes a breach of such party's fiduciary duty. Id. § 1786(g)(1)(A)(ii), (iii). 33 &#x2022; The adverse effect element is established when, as a result of a party's misconduct, a credit union has suffered or will probably suffer financial loss or other damage. Id. § 1786(g)(1)(B)(i). 34 &#x2022; The final element of the prohibition test requires a finding that a party's conduct involves personal dishonesty or demonstrates such party's unfitness to serve as a director or officer of, or to otherwise participate in the conduct of the affairs of, an insured credit union. Id. § 1786(g)(1)(C)(i),(ii). 35 Here, Gully concedes, as she must, that the second element (adverse effect) was satisfied by the WFCU's loss of over $31,000 during the course of her father's misuse of the corporate credit card. The Board, however, made no finding of personal dishonesty on Gully's part. Thus, the issue is distilled to whether Gully was guilty of misconduct that rendered her unfit to serve as a fiduciary in a credit union. 36