The National Credit Union Administration continues to face backlash for paying out more than $1 billion in contingency legal fees to several law firms for various lawsuits.
The lawsuits, filed through 26 complaints in federal courts in New York, Kansas and California against 32 defendants, sought damages from banks that sold bogus securities to corporate credit unions that ultimately failed during the financial crisis.
The lawsuits thus far have recovered more than $5 billion, more than $1 billion of which went to the law firms Korein Tillery and Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC, according to the NCUA website.
Politico reported earlier this week that the House Financial Services Committee is investigating the payments.
“The payment of over one billion dollars in legal fees to private counsel raises serious questions about the propriety of the NCUA’s legal fee arrangements, including whether the arrangements were in the best interest of the NCUA,” Rep. Ann Wagner (R-Missouri) said in a letter to NCUA Chairman Mark McWatters, according to Politico.
Camden Fine, president and CEO of the Independent Community Bankers of America, sent his own blistering letter on the matter on Thursday to Wagner.
“The NCUA utterly failed to negotiate competitive terms for legal services and allowed itself to be bilked,” Fine wrote in a letter to Wagner, according to The Credit Union Times.
Former NCUA Chairman Michael Fryzel, who entered into the agreements with the two firms, defended the arrangement.
“For those who believe that the fees earned by the attorneys are high, they need to understand that is the way the legal system works,” he said in a statement. “In a suit for damages, attorneys earn a percentage of what they recover. The more they get for a client, the more they earn for themselves. It is an incentive-based system that encourages a greater effort. Had they charged an hourly rate or the recovery was minimal, many would complain that NCUA wasted credit union funds.”
McWatters acknowledged earlier in the week in a statement to The Credit Union Times that the fees were excessive and that the agency is trying to renegotiate, but have so far been unsuccessful.
According to the letter obtained by Politico, Wagner said she is seeking more information from the NCUA about the arrangement with the two law firms.
Politico reported that Wagner has requested documents related to NCUA’s legal services agreement with the firms, including all records related to the selection of the law firms and all communications between the agency and the firms.
