Page 1       TOP OF DOC


House of Representatives,
Subcommittee on General Oversight and Investigations,
Committee on Banking and Financial Services,
Washington, DC.

    The subcommittee met, pursuant to call, at 10:05 a.m., in room 2128, Rayburn House Office Building, Hon. Spencer Bachus, [chairman of the subcommittee], presiding.

    Present: Chairman Bachus; Representatives LaTourette, Waters and Kilpatrick.

    Also Present: Representative Kanjorski.

    Chairman BACHUS. At this time, I am going to call to order the General Oversight and Investigations Subcommittee of the Committee on Banking and Financial Services.

    Our hearing today is to review the implications of OPM's decision to decertify the National Credit Union Administration.

 Page 2       PREV PAGE       TOP OF DOC
    On August 8, 1997, the Office of Personnel Management—OPM—notified the National Credit Union Administration that it was revoking the NCUA's authority to hire employees. A month later, on September 8, 1997, the OPM issued a report detailing its findings upon which the decertification decision was based.

    This report revealed significant and intentional violations of merit system principles. For instance, 49 individuals were hired under the Outstanding Scholar Appointing Authority for jobs that did not exist. The OPM also found that an additional 16 individuals were essentially ''preselected'' for positions by advertising employment opportunities for remote locations in an effort to reduce the candidate pool.

    In other words, bogus positions were created in remote locations with no real intent to fill those positions in those remote locations, in an attempt to get the number of candidates for those applications to eliminate candidates and applications.

    Particularly disturbing is the evidence that many of these actions were taken specifically to avoid hiring veterans and displaced Federal employees.

    The OPM's decision to take the extraordinary step of revoking the hiring authority of the entire NCUA reflects the intentional nature of the violations at hand. By some accounts, this may be one of the most serious indications of hiring abuses seen in decades.

    It also appears that even more outrageous actions than previously reported were planned and perpetrated by senior NCUA management. For instance, we now have reason to believe that two sets of ''books'' were kept, standard application materials focusing upon experience and merit, and a paralegal set of materials that focused upon the gender, race and disability information of particular applicants.
 Page 3       PREV PAGE       TOP OF DOC

    NCUA regional office personnel were instructed to send lists of candidates to NCUA headquarters, noting the race, gender and disability information. We have documents that suggest that certain applicants may have been disqualified on these factors alone. Equally disturbing, it appears that when the OPM announced its planned audit of the NCUA last April, NCUA headquarters instructed regional offices to cleanse their files of this evidence, which would have been evidence of misconduct.

    The NCUA Board is to be commended for adopting last Thursday, a strong response to the OPM report. This included, among other things, placing responsible agency officials on administrative leave pending the outcome of further investigation. Serious action was clearly warranted.

    However, I think there is little doubt that this episode, building on others, has now created a true credibility crisis for this agency. For senior and mid-level management of a Federal financial regulator to have been involved in such a wide-ranging prohibited personnel practice and to have taken steps to cover up such conduct clearly undermines the trust of the credit union industry in its regulator. It takes little imagination to visualize the type of corrective action the NCUA would take against credit union officials found to have engaged in such an extensive violation of the laws and regulations governing credit unions.

    Although it may be true that they were coerced and left with little alternative, NCUA mid-level management clearly chose the path of least resistance. Although I do not diminish the intense pressure someone is under if their livelihood is threatened, it does not appear that anyone in NCUA mid-level management blew the whistle.
 Page 4       PREV PAGE       TOP OF DOC

    In this regard, I have instructed subcommittee staff to explore the possibility of hearing from mid-level NCUA management at a hearing next Tuesday.

    The NCUA Inspector General may share responsibility in this regard. One has to question whether it would have been the case that no one at NCUA chose to report this scheme if an aggressive and credible Inspector General were in place.

    Again, I commend the NCUA Board for the decisive action it has taken. Nevertheless, the NCUA Board is ultimately responsible for the conduct in question. In this regard, it is troubling to me that we have reports that the OPM disclosed serious violations to the NCUA as early as July 8 of this year. The OPM decertified the NCUA on August 8, and a formal report was issued on September 8. Yet, NCUA did not take action until September 25. It also seems unlikely that such wide-ranging violations could ever have occurred absent a general atmosphere of management intimidation. I am eager to hear from the NCUA Board on these matters.

    I have read the statements of the board members, and I want to commend Ms. Bowné, in particular, for what I think was a very succinct statement. I also want to commend Ms. Wheat. It is obvious that although you are a very new board member, that you have obviously, I think, gained a great insight on how to get this board out of the situation it finds itself in. I particularly want to commend both of you.

    There are reports that the rules governing NCUA Board action continue to cause dissension among board members. I have been critical of NCUA management in the past. This is not a personal matter. I just do not think the board can function over the long run if there is not an open flow of information between all board members and an ability for any board member to place items on the board agenda.
 Page 5       PREV PAGE       TOP OF DOC

    The role of the Executive Director continues to be problematic as well. Although it is not the job of this Oversight Subcommittee or the Congress as a whole to micromanage the NCUA, I have instructed staff to explore legislative solutions to these problems.

    I will be working with the board in discussing those. I would like to comment briefly on another matter. Press reports and statements by agency officials have created an impression that this episode should be viewed as just a well-intentioned diversity campaign that simply got out of hand. I would first point out that a full investigation has yet to be completed.

    At a minimum, I think it is safe to say that regardless of the intent, there are many opportunities for abuse, whether it be attempts to hire friends, or simply an effort to create a ''loyal'' work force. In any case, where candidates are preselected and are given positions without regard to merit, there ought to be room for concern.

    In any event, we are not here to discuss the merits of diversity programs, of which I think every Member of Congress possesses a different view. Since we are thankfully well past the time when anyone can be openly discriminated against simply because of their race or gender, I think that the actions that have been uncovered at the NCUA can be opposed by everyone, especially those that support aggressive diversity initiatives. The mismanagement and misconduct uncovered at NCUA only serve to undermine those programs that do work effectively.

    In other words, what we say today ought to be taken as a criticism of Affirmative Action programs or programs which encourage certain policies. When these programs do not work as designed, they sometimes bring discredit on themselves and open themselves up for criticism from the general public. So I think that supporters of Affirmative Action should be especially concerned that we address this problem.
 Page 6       PREV PAGE       TOP OF DOC

    Finally, I would note that this hearing is not about any political debate concerning the role of credit unions. It would be held regardless of the particular Federal regulator involved. In fact, I support a strong independent regulator for the credit union industry.

    The reason for this hearing is simple: When we receive reports of mismanagement, the credit union industry and its members that pay for the NCUA are being poorly served and deserve a fair and open accounting.

    Chairman BACHUS. Today, we will first hear from Ms. Janice LaChance, Acting Director of the Office of Personnel Management, to address the OPM's findings. At this time, Ms. Kilpatrick, would you like to make an opening statement?

    Ms. KILPATRICK. Just briefly, Mr. Chairman. Thank you very much for the opportunity to say briefly as a credit union person who has, in my three professions, as a teacher, a legislator, and now as a Congressperson, used the services of a credit union, I am happy to be a part of the panel, first of all. I have had an opportunity to review some of the materials that have been provided, including the report by the Office of Personnel Management, as well as some of the testimony, and I am anxious to hear from the parties involved.

    It is important, in my opinion, that we keep a healthy credit union movement, and credit union services, alive in this country, that you provide a great service for many of my constituents and Americans across this country. So it is important, and I am hopeful that the board will work together well in the interests of those millions of people who use the credit union, and we will be looking forward to the testimony from the board members, as well as Ms. LaChance. So thank you for the opportunity, and I look forward to your testimony.
 Page 7       PREV PAGE       TOP OF DOC

    Chairman BACHUS. Mr. LaTourette, would you like to make an opening statement?

    Mr. LATOURETTE. I would, Mr. Chairman. I want to begin by thanking you for scheduling this hearing to review the OPM report on illegal hiring practices at the National Credit Union Administration so soon after the release of the report. The findings contained in that report certainly warrant this subcommittee's current and immediate consideration.

    As you have stated and as the report indicates—and I look forward to the testimony, many of those involved in the OPM investigation have stated that they consider these violations to be the worst report of Federal hiring abuse since the passage of the Civil Rights Act in 1964, from vacancy announcements for false duty locations to the improper use of the Outstanding Scholarship Appointee Authority, the NCUA's veterans and other Federal displaced Federal employees.

    Equally disturbing, and I have to say maybe more disturbing, is the fact that the report documents activities by NCUA officials to cover up the improper hirings. Given the seriousness of these violations, I applaud OPM's dramatic step to withdraw the NCUA's authority to make appointments and to refer the evidence for the review to the Office of Special Counsel for further investigation.

    As a strong supporter of the credit union movement in this country, it is truly unfortunate that less than one week before the Supreme Court's arguments in the Common Bond Case, the credit union industry must be distracted by the news that their regulating industry has engaged in illegal and improper hiring practices.
 Page 8       PREV PAGE       TOP OF DOC

    The credit unions as an organization, the credit union members, the millions throughout this country, deserve better from their regulators than they have apparently received in this instance.

    Again, Mr. Chairman, I want to thank you for scheduling this hearing, and I very much look forward to hearing from our witnesses.

    Chairman BACHUS. Thank you. At this time I am going to swear you in, Ms. LaChance.

    [Witness sworn.]

    Ms. LACHANCE. Yes, I do.

    Chairman BACHUS. You are now considered under oath.


    Ms. LACHANCE. Thank you, Mr. Chairman and Members of the subcommittee, it is truly an honor to be here to provide testimony on behalf of OPM. As you may know, I was recently confirmed Deputy Director of the agency and became its Acting Director upon the resignation of former OPM Director Jim King, so this is my first opportunity to provide testimony before a congressional subcommittee, and I am proud to speak of the activities of OPM's oversight function and how diligently we are working to achieve our strategic goal of protecting and promoting a merit-based civil service, through an effective oversight and evaluation program.
 Page 9       PREV PAGE       TOP OF DOC

    However, it is not pleasant to have to discuss the findings of serious violations of merit system principles and laws as detailed in our report of a Delegated Examining Oversight Review of the National Credit Union Administration. Findings of this magnitude are very rare, as are the measures we have taken to correct them.

    Let me repeat, it is extremely rare to find that an agency has committed violations as serious as these. We often find honest errors, misinterpreted regulations, or operating procedures that must be improved to protect the merit principles. In these cases, we suggest improvements, such as better quality control, training for managers and personnelists, and we provide technical assistance to assure compliance with merit principles and required personnel practices. In fact, this is just the way the process began with the NCUA.

    In July 1996, we reviewed NCUA's Delegated Examining Unit as part of our review of delegated examining authorities granted to all agencies. The major problem discovered at that time was their use of an unauthorized minimum education requirement. We required corrective action and told them we would do a follow-up audit within a year.

    In April of 1997, they were notified that the follow-up review would begin on June 16. The review began as scheduled. Throughout the review, the NCUA staff cooperated fully in providing all files and records requested.

    We found that the problems noted in the 1996 review had basically been corrected. However, it soon became evident that even more serious violations were taking place.

 Page 10       PREV PAGE       TOP OF DOC
    At the opening meeting of the review, the Director of Human Resources advised our team that there were situations where vacancy announcements had listed a duty station that was not, in reality, where the position was located. She later produced a copy of a May 13, 1997, memorandum to senior NCUA managers which stated that vacancies should not be announced at one duty station with the knowledge that it would change in 90 days.

    The on-site review concluded on June 20, 1997. We identified serious violations in two areas, the use of false duty stations and the inappropriate use of the Outstanding Scholar Appointing Authority.

    Regarding the use of false duty stations, four situations were identified in which vacancy announcements issued for false duty locations resulted in the hire of 16 individuals. The purpose of the false duty locations was to enable selection officials to hire applicants they had inappropriately preselected. NCUA officials instructed applicants to apply under the false duty location announcements, selected the applicants, and assigned them work in cities and States not listed in the vacancy announcement under which they applied. Permanent official personnel documents used to preserve employment and benefit entitlements were falsified. None of these 16 employees ever worked in the location to which he or she was appointed.

    As I have stated, this practice allowed for the preselection of candidates. I think an explanation of what we mean by ''preselection'' would be helpful. There are no indications that any of the individuals were ''preselected'' because of political affiliation or family relationships. Rather, the indications are that many of these people had been contacted at job fairs, through college recruitment efforts, or recruitment efforts of NCUA employees.

 Page 11       PREV PAGE       TOP OF DOC
    The other serious violations involved inappropriate use of the Outstanding Scholar Appointing Authority. This Authority is part of a Federal Court Order known as the Luevano Consent Decree, and use of this noncompetitive appointing authority is restricted to positions identified in the decree. Outstanding Scholar Authority is a hiring tool created by the court decree to address racial diversity under certain circumstances. It is not a tool designed to address gender issues.

    Prior to 1994, the NCUA's major occupation was ''Financial Institution Examiner.'' Because this occupation was covered by the Luevano Consent Decree, noncompetitive Outstanding Scholar appointments could be made. NCUA then determined that the ''Financial Institution Examiner'' was inappropriate for their work, and in 1994 OPM approved a new occupation, ''Credit Union Examiner,'' for their use. Credit Union Examiner positions are not covered by the consent decree and full competitive examining procedures must be used to fill these jobs.

    After this new occupation was in place, NCUA continued to appoint individuals to the nonexistent Financial Institution Examiner jobs and reassigned them to the new occupation after a few months.

    It is clear that this practice was adopted to deliberately circumvent the competitive examining process required for the Credit Union Examiner jobs. When questioned about the improper use of the Outstanding Scholar authority, NCUA managers indicated the practice was necessary to increase diversity. This claim is not credible.

    Between July 1995 and March 1997, NCUA made 45 hires under this authority. Only three hires were African-American, one was Asian or Pacific Islander, and one was Hispanic. Even considering the goals of diversity, the mandate to create a Government that looks like America is not a mandate to violate merit principles and veterans preference.
 Page 12       PREV PAGE       TOP OF DOC

    These improper Outstanding Scholar appointments resulted in the loss of appointment opportunity for veterans and Interagency Career Transition Program eligibles, who are individuals entitled to preference in hiring. In addition, the basic concept of fair and open competition was severely compromised, just as it was with the false duty station appointments.

    It is also disturbing to note that even after we had communicated these findings to NCUA, four additional improper hires were made.

    Considering the seriousness and pervasiveness of the violations I have described, OPM had to take decisive action to protect the merit system. Therefore, on August 8, 1997, we took the extraordinary step of decertifying their delegated examining unit and we withdrew their appointing authority. We have also referred this matter to the Office of Special Counsel for investigation.

    Our report indicates the corrective actions we have directed NCUA to take. In summary, they must take the actions necessary to ensure that all qualified candidates receive appropriate consideration for the positions that were fraudulently filled. This will require reannouncing many vacancies and reworking many certificates.

    We are also requiring NCUA managers and staff to receive training on these important principles, and until we are confident that the agency can perform in accordance with all appropriate laws, OPM will not consider restoring their appointing or examining authorities.

    We have no way of fully quantifying the cost of these actions. NCUA will expend considerable staff time on the corrective actions and the loss of appointing and examining authority means more time will be spent on making appointments. Obviously, OPM and the Special Counsel will be expending considerable staff time and money. If the Special Counsel determines further action is necessary, more time and effort will be required.
 Page 13       PREV PAGE       TOP OF DOC

    Equally important, however, are the intangible costs in terms of low employee morale, staff turnover, and the loss of public confidence and public trust in this agency.

    While it is a costly endeavor for both the NCUA and the other agencies involved, I am sure the subcommittee appreciates the much higher cost to all of us if these serious violations of the merit system principles and the veterans preference went uncorrected.

    That concludes my prepared statement, Mr. Chairman. I will be happy to answer any questions the subcommittee might have. I would like to make a request at this time if Carol Okin could join me here at the table for the question session. She is OPM's Associate Director for Merit System Oversight.

    Chairman BACHUS. That would be fine. I am going to ask you some questions about six particular documents, and I appreciate your opening statement. I particularly note that whatever the reason for the system of hiring that was set up, it didn't reach the goal that was apparently behind it anyway.

    Ms. LACHANCE. No, it did not.

    Chairman BACHUS. We are passing out documents. We will also pass them out to both sides. I think we supplied them to the Members yesterday.

    These documents have all been represented to us as authentic by NCUA employees. My questions to you will be based upon the assumption that they are accurate. We have no reason to believe that they are not. They look very official. At the conclusion of my questions, I am going to move to enter all these documents into the record. I think these documents we sent over to you yesterday afternoon.
 Page 14       PREV PAGE       TOP OF DOC

    Ms. LACHANCE. Mr. Chairman, I have not seen them, but I will be glad to go ahead with you and answer your questions.

    Chairman BACHUS. I will tell you what part of the document I particularly want to focus on. The first document in this package of six is a memo by Dorothy Foster, which is dated 1–24–96.

    In general, the memo deals with setting pay for examiners who change duty stations within their first six months. I want to bring your attention to the second paragraph on page two of this memo. It states, ''There are two reasons—'' do you see that? ''There are two reasons for changing new examiner duty stations. First, we may use one duty station on the announcement to facilitate recruitment, knowing that it is likely to change later.''

    My question is this, Ms. LaChance. This seems to indicate that senior NCUA management knew that duty stations were being used to facilitate recruitment. Is this an appropriate use of duty stations?

    Ms. LACHANCE. No, sir. We don't believe it is. We would have no way of judging someone's intent in writing this kind of paragraph, but this is exactly the point we are trying to make in our report, that these people were recruited intentionally to work somewhere other than where the duty station was listed in the vacancy report.

    Chairman BACHUS. You had not seen this document prior to the hearing?
 Page 15       PREV PAGE       TOP OF DOC

    Ms. LACHANCE. I had not.

    Chairman BACHUS. Does it reinforce the conclusions of your report?

    Ms. LACHANCE. That paragraph certainly does.

    Chairman BACHUS. And you have never been supplied a copy of that document, have you, by the NCUA?

    Ms. OKIN. Mr. Chairman, to my knowledge, and I have looked at a lot of the records and files that we gathered when we were on-site at NCUA, I have not seen this document as part of that documentation.

    Chairman BACHUS. OK, thank you. Let me direct your attention to document 2, which is a July 11, 1996, memo from the Executive Director to the NCUA staff.

    Ms. LaChance, I note that in this memo to the staff, the Executive Director indicated that all hires had to be approved by his office. He requests under A–1, if you look at that, that regional staff ''Duplicate the DEU applicant list or the merit promotion checklist and annotate it with the applicant's sex, race, national origin and disability.'' Do you see that?

    Ms. LACHANCE. Yes, sir.
 Page 16       PREV PAGE       TOP OF DOC

    Chairman BACHUS. Under A–2 he requests that DEU or merit promotion certificates be annotated with the same information and requests that all material be sent to the Director, Office of Human Resources, for referral to the Executive Director for Approval on the same day that it is received.

    Under A–3, he instructs staff to ''Retain the original DEU applicant list and the merit promotion checklist without annotation for the case files. Do not file,'' it goes on, ''the annotated list in the DEU or merit promotion case file.''

    Ms. LaChance, it appears to me that the NCUA basically kept two sets of books, one with race, gender and disability information, and one without. Is that problematic from the OPM's perspective?

    Ms. LACHANCE. Yes, sir, it is. We do not believe that information on race, sex, national origin or disability has any place in the hiring process. Certainly keeping two sets of records, we believe, would be inappropriate at best.

    Chairman BACHUS. Obviously, there were two sets of records.

    Ms. LACHANCE. Yes, sir.

    Chairman BACHUS. One an official record, and one not to be kept in the permanent file. Were you aware of this practice?

 Page 17       PREV PAGE       TOP OF DOC
    Ms. LACHANCE. I was not.

    Ms. OKIN. Again, Mr. Chairman, I have not seen this particular document. It certainly further corroborates what we found. We were at the Credit Union Administration. I would like to look at it in much more detail. Certainly two sets of lists is an inappropriate practice in any situation.

    Chairman BACHUS. Thank you. The third document I want to ask you about appears to be minutes from the Regional Director's meeting that includes ''Karl,'' which I assume is Mr. Hoyle, the Executive Director, and ''Dottie,'' who I assume is Ms. Foster, the Director of the Office of Human Resources. The board has placed them on administrative leave with pay.

    I refer you to page 6 of those minutes where it is stated, ''R.D. will choose city and create vacancy announcement. R.D.'s staff will assist applicant through the application process.''

    Ms. KILPATRICK. Mr. Chairman, where are you?

    Chairman BACHUS. On page 6 of the third document. We should have marked these up. It is actually the third page, because they only gave you page 1, 5 and 6. It would be the third page, but it has ''6'' at the bottom of the page. It is about the fourth paragraph up. It starts ''R.D. will choose city . . .''

    Ms. KILPATRICK. Yes.
 Page 18       PREV PAGE       TOP OF DOC

    Chairman BACHUS. It is actually page 6 of the minutes, but we only supplied you with the front page and pages 5 and 6. It states, ''R.D. will choose city and create a vacancy announcement. R.D.'s staff will assist applicant through the application process. Keep hire at that location for 90 days, then move where you need them. Use your overhire authority to meet diversity requirements.''

    Ms. LaChance, does this not describe the problems that the OPM has found were being done in several NCUA regions?

    Ms. LACHANCE. Yes, Mr. Chairman, it certainly does smack of preselection.

    Chairman BACHUS. All right. Had you seen that document before?

    Ms. OKIN. We have never seen this document before.

    Chairman BACHUS. Thank you.

    This is a Journal vote. What I may do is let the Members go vote, and I am going to stay here and go through this. I think my constituents will forgive me for not approving the Journal.

    The other Members are going to go ahead and make their way.

 Page 19       PREV PAGE       TOP OF DOC
    Ms. KILPATRICK. Mr. Chairman, I am going to have to object.

    Chairman BACHUS. I think I am doing the wrong thing. I think Ms. Kilpatrick is absolutely right, so I am going to recess this meeting until we have all had an opportunity to go vote. I apologize to the Members.


    Chairman BACHUS. I am going to call to order the Oversight Subcommittee. Ms. Okin, one of the staff members from the Minority side pointed out quite correctly that we have not sworn you in. That was an oversight on my part.

    [Witness sworn.]

    Ms. OKIN. I do.

    Chairman BACHUS. You are now considered under oath.

    I am going to wait about a minute for the Members to have an opportunity to be seated.

    Ms. OKIN. Excuse me, Mr. Chairman, I would just like to take a moment to clarify a statement I made before the recess. We were talking about the documentation, and I want to make sure that it is clear that when I said that this documentation had not been part of the official file and that we had not seen it, it was in the context of the review that we did on-site and all the myriad materials we collected. A few of the documents in this package, the Office of Congressional Relations did share with my office late last evening, and some of our folks have done a cursory review. But in the context of the overall review, these documents were not part of the file.
 Page 20       PREV PAGE       TOP OF DOC

    Chairman BACHUS. Our office actually supplied them to you yesterday. You are talking about our office?

    Ms. OKIN. The Office of Congressional Relations shared a few of the documents with us.

    Chairman BACHUS. That is because we gave them to them and asked them to share them with you. My question is, you did not get them from NCUA?

    Ms. OKIN. No. No.

    Chairman BACHUS. I know that it was late yesterday afternoon when we gave them to them, so I know you haven't had an opportunity to——

    Ms. OKIN. To fully digest them.

    Chairman BACHUS. All right. We will proceed at this time.

    The fourth document that I want you to briefly review is a February 27, 1997, memo from a Regional Director to Ms. Foster. It appears to be complying with the request of Mr. Hoyle's July 1996 memo that all hires be approved by the Executive Director first.

    I show you that document. Ms. LaChance, does this memo present problems from OPM's perspective?
 Page 21       PREV PAGE       TOP OF DOC

    Ms. LACHANCE. Yes, sir, it does. Again, this is an inappropriate way to hire Federal employees who should be hired on merit.

    Chairman BACHUS. All right, thank you.

    Let me turn to document 5. Actually, I think there are only five documents. We decided to scale back somewhat. This is a memo from Ms. Foster to personnel involved in hiring concerning the upcoming OPM audit. As we reviewed earlier, Mr. Hoyle's July 1996 instructions were that two sets of files be created. This memo instructs staff to ''Remove all interview records, all opinions, comments, and correspondence not related to evaluation criteria, the identification of applicants by race and national origin, and information pertaining to persons who did not apply for the vacancy.''

    Ms. LaChance, is this memo problematic from OPM's perspective, especially the reference to ''information not related to evaluation criteria'' and ''information pertaining to persons who did not apply for the vacancies.''?

    Ms. LACHANCE. Yes, sir, it is extremely problematic. While there may not—even if there may not be now in these documents, it certainly would have been beneficial to us in our oversight function, and we count on the agency's cooperation in getting all of these documents so that we can make an appropriate evaluation. This certainly would have reinforced our conclusions.

    Ms. OKIN. I affirm that completely. While working on delegated examining unit files and keeping them in order is appropriate, Mr. Chairman, the kinds of things that I see just listed here are highly inappropriate.
 Page 22       PREV PAGE       TOP OF DOC

    Chairman BACHUS. All right, thank you. Were either of you aware that the NCUA had cleaned up their files before the OPM conducted its audit?

    Ms. LACHANCE. I was not, Mr. Chairman.

    Ms. OKIN. Nor was I.

    Chairman BACHUS. So you have not been advised by the NCUA or any of their officials that, in fact, they went through this cleansing process?

    Ms. LACHANCE. No. I have not.

    Ms. OKIN. Nor I, sir.

    Chairman BACHUS. So your audit results are actually based on what you found, and if, in fact, this was done, it would have——

    Ms. LACHANCE. It would have been extremely damaging if we had seen these documents.

    Chairman BAUCHUS. Thank you. At this time I want to yield to Ms. Kilpatrick.

    Ms. KILPATRICK. Thank you, Mr. Chairman, Ms. LaChance, Ms. Okin. I first want to go on record as the Democrats did not receive this packet of documents until this morning, Mr. Chairman, since sitting and coming to the room this morning was the first time we had an opportunity to look at these, unlike last evening for Ms. LaChance and her staff and some other time for the Majority staff. I first want to make that point.
 Page 23       PREV PAGE       TOP OF DOC

    Chairman BACHUS. You are saying that——

    Ms. KILPATRICK. I am saying I, nor my Democratic colleagues, did not see this packet of new documents until coming into the room this morning.

    Chairman BACHUS. OK. Now, first of all, these were some documents that my staff actually discovered, and they were brought to our attention this week. When I got back to Washington, I reviewed them with them, and immediately asked them to distribute them to the Democratic staff and to OPM, not to wait for the hearing.

    I also, in fact, I have been advised I did not have to do that according to the rules of the subcommittee, since they were not generated from a formal request by the subcommittee for material, but that my staff had gotten them. So I want to say, first of all, I don't use that as an excuse, but I felt like by supplying them to you voluntarily, we did try to comply.

    I will say this. Perhaps what should have happened is that they should have contacted me back in my district on Friday, and Monday when these documents came in, and I could have made a decision then. We did get them to the—what time did the Democratic staff get them? We provided them to the Minority staff yesterday afternoon.

    Ms. KILPATRICK. 6:30 or 7 o'clock. My only point in all of this, they are becoming a part of the record. I think OPM is saying they just saw them, with some exception, I don't know which. I was going to ask of the five documents, what you saw before this morning? Some of them, Ms. Okin said she saw some of them in the investigation.
 Page 24       PREV PAGE       TOP OF DOC

    Chairman BACHUS. I got in at about 2:30 yesterday afternoon, and I was aware we had these documents, that they had come in just in the last day or two, and I did ask that they be distributed.

    Ms. KILPATRICK. Thank you, Mr. Chairman.

    Chairman BACHUS. There was absolutely no intent to——

    Ms. KILPATRICK. To hide or shield. I am not suggesting that.

    Chairman BACHUS. I would say this. I think you will agree that this is not a partisan-type hearing.

    Ms. KILPATRICK. We are just trying to disclose here. I appreciate that.

    Chairman BACHUS. I think nothing in these documents reflects on the Administration or on the——

    Ms. KILPATRICK. Which Administration are we speaking of?

    Chairman BACHUS. The Clinton Administration.

    Ms. KILPATRICK. No, it reflects badly on the Credit Union Administration.
 Page 25       PREV PAGE       TOP OF DOC

    Chairman BACHUS. I totally agree with that. I am just saying, there is no political advantage. This is something, in fact, that you all, the Minority staff has been very helpful on working on.

    Ms. KILPATRICK. Thank you, Mr. Chairman. I just wanted to get to that to say this is my first time seeing them this morning, and further, Ms. LaChance, would you say these are authentic documents that have been presented, as much as you can tell, or do you know?

    Ms. LACHANCE. They could be. I have no way of knowing. They appear to be. Just looking at them here, I would really have no way of knowing where they came from.

    Ms. KILPATRICK. OK. I think that is my point. They were not in the original, whatever you viewed, and your investigation came up with very horrid, I think, allegations here, and I am very uncomfortable about what I have been hearing and reading over the last week, I guess it is. I just want to make sure as these are put before us this morning and become a part of the record, you cannot authenticate them right now and say they are valid. They look that they probably are, but you did not have an opportunity to review them in your original investigation?

    Ms. LACHANCE. That is correct.

    Ms. KILPATRICK. Now that you have made your investigation, released the record, and I have already read the Chairman's remarks and what they intend to do, have you been privy to the Chairman's remarks, and we will hear from them shortly, I am sure?
 Page 26       PREV PAGE       TOP OF DOC

    Ms. LACHANCE. Yes.

    Ms. KILPATRICK. What they are planning to do, you may not have another chance to comment, is it enough? Will OPM accept those recommendations? Will they get back their hiring rights and so forth?

    Ms. LACHANCE. OPM's corrective actions were very specific, Congresswoman. We intend to make sure that they are all implemented and that the system for hiring gets back on the right track.

    Once we are assured of that, but not one moment before, then the Credit Union Administration will be given their delegated examining authority back. But not until we are confident that every step has been taken and that everyone who was disadvantaged in the last couple of years has an opportunity to openly compete for job openings there.

    Ms. KILPATRICK. So in your preview then, is it in the Director's comments, we have them in writing, I am sure we will hear from them and you will not have a chance to respond, is it enough? Has he laid out in his corrective action enough to satisfy OPM?

    Ms. LACHANCE. I believe his corrective actions do entail everything that we require him to do, if I could double-check.

    Ms. OKIN. We certainly understand that the intent of the Credit Union Administration is to make corrective action for all of the issues that have been raised in this report.
 Page 27       PREV PAGE       TOP OF DOC

    Ms. KILPATRICK. What will be the process to give back to the Credit Union Administration their ability to hire again and so forth? What steps? Will that be a written memo?

    Ms. OKIN. It will definitely be a written communication from the Office of Personnel Management to the Credit Union Administration at some point in the future.

    Ms. KILPATRICK. Some point in the future, when they meet what they said they are going to do, I presume?

    Ms. OKIN. We have several hurdles to overcome. In our official reports to the Credit Union Administration, we laid out some timeframes for corrective action, 90 days, 120 days. So the Credit Union Administration needs to aggressively pursue all of those corrective actions.

    Obviously, as Acting Director LaChance said, training and making the individuals who are involved in this action and activity in the future aware of their responsibilities is certainly a piece of that. So it is really a part of a whole. There is not a specific action completed and authority is returned. It is really a broader issue than that, because the issues uncovered in this review were that serious and of that magnitude, of that nature.

    Ms. KILPATRICK. I see. Is OPM's responsibility to cite only, or do you also place blame?
 Page 28       PREV PAGE       TOP OF DOC

    Ms. OKIN. There is really a very specific division of labor here. The Office of Personnel Management is really charged with overseeing the activity in the human resource arena. Where problems are identified, we direct corrective actions to the agencies about the individuals that have been negatively affected by such inappropriate behavior. Our referral to the Special Counsel's office is really where disciplinary action or specific action against individuals who have improperly used their personnel management authority takes place. So we deal with the aggrieved, the individuals who have been negatively affected.

    Special Counsel's office deals with what needs to take place for those folks who might have committed prohibited personnel practices.

    Ms. KILPATRICK. Is it OPM's or the Credit Union Administration's responsibility to make that referral?

    Ms. OKIN. OPM has made the referral to the Office of Special Counsel. We understand that they are beginning their review of our report, and in discussions with our staff about what is going on, what has gone on at the Credit Union Administration. So that referral has been made.

    Ms. KILPATRICK. Finally, I think now that you have completed the report and the referrals have been made, OPM's responsibility, again, after they convene and confer with the Credit Union Administration and its Directors, will, I guess, after all of the cites have been finalized or brought to compliance, will then issue in writing to the Credit Union Administration that they can have these hiring privileges and so forth back? Is that the way it works?
 Page 29       PREV PAGE       TOP OF DOC

    Ms. OKIN. It is certainly the intention of the Office of Personnel Management to have personnel authority rest in the agencies who need to use it, but we certainly, as Acting Director LaChance said in her opening statement, we need to assure that all components of the human resource management function at the Credit Union Administration are being properly managed.

    Ms. KILPATRICK. I would agree with that. Does it take longer—I thought that was going to be my last question, but one more. Is it a longer process with OPM or with the Credit Union Administration to fill vacancies, or is it the same? Is the process the same? The process may be the same in filling vacancies? Is OPM's direction or the Credit Union's direction more speedily filled?

    Ms. OKIN. Because we have withdrawn their appointing authority and their delegated examining authority, it is certainly going to extend the time that is needed to fill positions, because the staff work may be done at the Credit Union Administration, but the terms and documentation has to be forwarded to OPM for final appointing authority. As far as specific timeframes, I am not sure I can answer the question here this morning. It certainly will lengthen the time to fill positions at the Credit Union Administration while this authority is rescinded.

    Chairman BACHUS. Thank you. At this time I am going to recognize Mrs. Waters and Mr. Kanjorski, if they wish to make a statement. I will start with Ms. Waters.

 Page 30       PREV PAGE       TOP OF DOC
    Ms. WATERS. Thank you very much. Mr. Chairman, I would like to commend you for doing what this subcommittee was charged to do, oversight and investigations. You have helped to uncover actions that appear to be illegal, that appear to fly in the face of the responsibility of any personnel operation. We have laws that govern how we do things, and they appear to have been violated.

    Having said that and commending you for unveiling this and bringing it to the attention of the Congress, I am convinced that all parties concerned are going to cooperate, are going to assist the investigation in every way possible to get to the root of how this all happened and who is responsible for it, and based on the information that I have, the attitudes of everybody appear to be in the right place; that nobody is running away fighting it, denying that these actions have taken place. So I am hopeful that the attitudes that I have experienced are the ones that will prevail throughout this and we will get to the bottom of this, and that everyone can move forward and try and do what this Congress expects them to do.

    I am concerned that everything possible is done to put together a strong staff and a strong operation that is representative, that is diverse, but certainly cooperation with this investigation is the number one focus that we all must have.

    So I thank you, Mr. Chairman. I intended to stay around. I do not know if I am going to be able to. If I had discovered that there were people who were going to stonewall or people who were going to be in denial, I would stay here and help you beat them up, but I don't think that is the case. So thank you very much.

    Chairman BACHUS. If there is a need for that, I can't think of a better person to be here, I am sure. Thank you.
 Page 31       PREV PAGE       TOP OF DOC

    Mr. Kanjorski, do you wish to make a statement?

    Mr. KANJORSKI. Thank you very much, Mr. Chairman. First of all, Mr. Chairman, I congratulate you, as Ms. Waters did, for holding these hearings and doing the proper oversight that the subcommittee is charged to do. I have well known interest in the credit union movement, and, of course, that is why I am here today, even though I am not a normal Member of the subcommittee. We want to make sure that whatever did happen is exposed and find out if there was any evil intent. If there was not and it was inadvertently done, or without evil intent, then we at least want to know how it can be corrected.

    Toward that end, I would like to direct a few questions, if I may.

    Chairman BACHUS. I had promised Mr. LaTourette actually on the questions he could go next, if that is OK.

    Mr. KANJORSKI. Sure. No problem. I yield back my time.

    Chairman BACHUS. Mr. LaTourette.

    Mr. LATOURETTE. Thank you, Mr. Chairman, and Mr. Kanjorski, I would be glad to yield to you for a few questions if I can get through mine real quickly.

    Ms. LaChance, I want to commend OPM for taking the action you did. I understand this is unprecedented action. Just speaking personally, I hope people lose their jobs over what occurred here. I think what occurred is disgusting.
 Page 32       PREV PAGE       TOP OF DOC

    Although your report accurately reflects it, I don't know if your testimony talked about it a little bit. We are talking about, at least in 16 of these cases, the NCUA developing a program wherein they would advertise a job where it didn't exist.

    One of the towns, and I am sure it is a delightful town, Minot, North Dakota; never heard of it. I am sure it is lovely there in all seasons of the world. But clearly people are thinking, and the thinking of those responsible is ''Who the heck would apply for a job in Minot, North Dakota?'' unless you had an affinity for North Dakota, knowing going into that you would be transferred within 90 days. I can't think of a more blatant conspiracy as to how to get preselected employees, to the detriment of Federal employees who lost their jobs and veterans who served their country either in war or peacetime.

    I think what has happened here is disgusting, and that is the best word I can use for it.

    You talked about preselection, not only in your report but also in your testimony, and you also indicated, reinforced not only in your written statement, but in your testimony before the subcommittee, that OPM did not find any preselection criterion related to political affiliation, family relationship or even friendship. I am wondering, aside from scanning the personnel files, I am wondering how you reached that conclusion?

    What investigation was done to make sure that preselection had nothing to do with any of what would be even worse criteria?

 Page 33       PREV PAGE       TOP OF DOC
    Ms. LACHANCE. Ms. Okin, involved in the investigation, could probably answer that better.

    Ms. OKIN. Yes, sir. I would like to speak to that very directly. The team that we had on-site were one of our most experienced teams of people who had done this kind of work all of their careers. One particular individual is, I guess I will say, she is like a dog with a bone. When you say scanning personnel records, there is that, and there is a detailed review of every document in a personnel folder to determine whether there was a family relationship, whether there was any connection that could be seen from the written record to a person and to a case. She documented that there were none. This was not initially part of the review, but the thoroughness of this individual took her down that road, because this very question was potentially to be asked in the future.

    So I can stand firmly behind the work that was done, that the records were thoroughly searched for any such suggestion.

    Mr. LATOURETTE. I appreciate OPM's thoroughness very much on that question. Ms. LaChance, could you sort of just put in context, you have been with OPM for a while, can you put into context the seriousness of the violations? Has OPM ever withdrawn the hiring authority from an agency before?

    Ms. LACHANCE. My conversations with the staff who have been there far longer than I have, people have told me that this is the worst they have seen in 25 years. Those are people who have been involved in this line of work.

 Page 34       PREV PAGE       TOP OF DOC
    Mr. LATOURETTE. Just before I yield to my good friend, Mr. Kanjorski, Ms. Waters made the observation that all parties need to cooperate to clean this mess up. I certainly want to reinforce those words. I think sadly, the documents that the Chairman brought to your attention a little earlier in the day, indicate that perhaps some folks still are not being forthcoming in attempting to get to the bottom of this.

    Again, as I said in the opening remarks, the millions of men and women that belong to credit unions in this country deserve better than they have received from some people in the regulatory agency. I hope everyone puts their best foot forward and resolves this as well.

    Ms. LACHANCE. If I could, Congressman, once our report was finalized and issued, I have to say that the Credit Union Administration has been extremely cooperative with us and worked closely with us to fix the systemic problems we found there. We are confident we can see this through and get the system back on the right track.

    Mr. LATOURETTE. I hope, too, that is the attitude that everybody has. What distresses me is the documents that the Chairman was discussing apparently had not been brought to OPM's attention until last night or at this hearing. So somebody still apparently has a vested interest in making sure that the whole truth is not revealed. I hope NCUA will move forward and become a wonderful regulatory agency that people can have confidence in. I am sorry, Mr. Kanjorski, I hogged up all my time.

    Chairman BACHUS. The gentleman from Pennsylvania.

 Page 35       PREV PAGE       TOP OF DOC
    Mr. KANJORSKI. Thank you very much, Mr. Chairman. I will direct my first question to Ms. Okin. Is it correct that at the June meeting when you went to NCUA, it was the Director of Human Services who made your team aware of the fact that these two types of violations existed, that is, the use of false duty stations, and the use of the Outstanding Scholars Program? Your testimony indicates that on page 2.

    Ms. OKIN. Pardon me?

    Mr. KANJORSKI. Your testimony on page 2 indicates the information was provided by the Director of Human Resources of the agency.

    Ms. OKIN. What I believe the testimony identifies, sir, is that the Director of the Human Resources office identified the false duty location issue.

    Mr. KANJORSKI. It says, ''At the meeting of the review, the Director of Human Resources advised our team that there were situations where vacancy announcements had listed a duty station that was not in reality where the position was located.''

    Ms. OKIN. That is right.

    Mr. KANJORSKI. That disclosure was made by the agency? That was not uncovered by an audit or anything?

    Ms. OKIN. That was communicated in the initial meeting, the false duty station issue, not the Outstanding Scholar.
 Page 36       PREV PAGE       TOP OF DOC

    Mr. KANJORSKI. There is a strong indication that this information came to light not due to some sort of on-the-spot examination or long, intrusive examination by your agency, but actually came to light when the agency being examined provided that information to you.

    Ms. OKIN. I will suggest, sir, that the communication was a little less obscure than direct, and I believe, if my memory serves me correctly, that there were appointments made very precisely like that even after we met with the folks on the initial meeting.

    Mr. KANJORSKI. After June of this year?

    Ms. OKIN. I believe there were a few appointments made even after that communication.

    Mr. KANJORSKI. That was June of this year?

    Ms. OKIN. Yes.

    Mr. KANJORSKI. Let me ask you this: How often has your agency examined this agency?

    Ms. OKIN. This particular agency? We have a cycle where we visit agencies in the delegated examining units of those agencies on a 4-year cycle, sir.
 Page 37       PREV PAGE       TOP OF DOC

    Mr. KANJORSKI. So every 4 years OPM goes into the agency?

    Ms. OKIN. To agencies. I want to speak specifically to the Credit Union organization and how we review delegated examining units that have had some histories of problems. We will visit more frequently. The reason we visited in 1996, our colleagues in our employment service function identified there was a need for an oversight review of the examining unit.

    Mr. KANJORSKI. I am asking a question, how often have you been there, before 1996?

    Ms. OKIN. I can't give you that precise examination.

    Mr. KANJORSKI. Had it ever been examined in the 25-year history of the agency?

    Ms. OKIN. I can't answer that. I believe we probably had been on-site, but it would be inappropriate to give you a specific answer.

    Mr. KANJORSKI. Having uncovered this, what period of time had the abuses occurred?

    Ms. OKIN. The 1996 review or 1997?

 Page 38       PREV PAGE       TOP OF DOC
    Mr. KANJORSKI. Whatever review.

    Ms. OKIN. 1993, 1994, 1995.

    Mr. KANJORSKI. Have you examined prior to 1993?

    Ms. OKIN. I can't answer that, sir. I need to look at our files and our records. I cannot answer that.

    Mr. KANJORSKI. Is it very possible this was an ongoing culture within the agency?

    Ms. OKIN. This was an ongoing culture?

    Mr. KANJORSKI. Within the agency, prior to 1993.

    Ms. OKIN. Again, since I can't tell you whether we were on-site prior to 1993.

    Mr. KANJORSKI. If it goes to 1993, that actually goes into the prior Administration's leadership of this agency. This isn't just this Administration we are talking about, or this leadership that is presently in place in the agency, but it predates that.

    Ms. LACHANCE. Congressman, I think what we are saying is it is possible. We just don't know.
 Page 39       PREV PAGE       TOP OF DOC

    Mr. KANJORSKI. I think we do know. You say you have cases back to 1993; is that correct?

    Ms. OKIN. We have records and examined records back there.

    Mr. KANJORSKI. This occurred in 1993?

    Ms. OKIN. What we found until 1996, which I believe goes back to the period of 1993, was the application of minimum education requirements that were beyond what were required. We did not in 1996, find the allegations that we reported in 1997.

    Mr. KANJORSKI. Did you look for them?

    Ms. OKIN. It is hard to find them when they are obscured, and they were very deliberately being obscured from the analyst's review.

    Mr. KANJORSKI. So you don't know whether this ever happened before 1996, is what you are saying?

    Ms. OKIN. I know it happened in 1995, 1996 and 1997, because we have evidence and we have the records and the report documents.

    Mr. KANJORSKI. Are you undertaking an examination now to see whether it happened prior to 1995?
 Page 40       PREV PAGE       TOP OF DOC

    Ms. OKIN. Not at this time. We have directed corrective action of all of the individuals that they have on the rules at the Credit Union Administration to make sure all appointments are, in fact, accurate and correct.

    Mr. KANJORSKI. Oh, could you make that examination and report back to this subcommittee, so we know?

    Ms. OKIN. We certainly will.

    Mr. KANJORSKI. One other question. Were any of the individuals who were inappropriately hired qualified for the positions for which they were hired? Were any of them qualified?

    Ms. OKIN. Yes.

    Mr. KANJORSKI. Were they all qualified?

    Ms. OKIN. I am going to say, yes.

    Mr. KANJORSKI. It is not a question of qualification. It is a question of preference.

    Ms. OKIN. It is a question of the proper competitive examining procedures being used, and all applicants get fair and open opportunity to apply for Federal jobs.
 Page 41       PREV PAGE       TOP OF DOC

    Mr. KANJORSKI. Thank you very much, Mr. Chairman.

    Chairman BACHUS. Thank you. We are going to recess this hearing, and then we will call the second panel upon our return. You are free to go. We certainly appreciate your testimony.


    Chairman BACHUS. I will call to order the Oversight Subcommittee of the Banking Committee. Our second panel will consist of the NCUA Board. We will first hear from Chairman Norman D'Amours, then Vice Chairman Shirlee Bowné, and board member, Yolanda Wheat.

    At this time I am going to swear in the board.

    [Witnesses sworn.]

    Chairman BACHUS. You are now considered under oath.

    Before I start, Chairman D'Amours, I have had an opportunity to read your statement during the break. I had read the other two statements and just want to also commend you on a fine statement. I appreciate your assurance that you are all taking this very seriously.

 Page 42       PREV PAGE       TOP OF DOC

    Mr. D'AMOURS. Thank you. Earlier having been left out of the commendation round, I was wondering what it was you found objectionable in my written statement. I am delighted to hear, Congressman, you did not. Thank you for saying that.

    Chairman BAUCHUS. Thank you.

    Mr. D'AMOURS. May I begin, Mr. Chairman?

    Chairman BACHUS. Yes. We are not going to enforce the 5-minute rule. If you wish to take longer than that, feel free.

    Mr. D'AMOURS. Thank you. I appreciate it. Good morning to you Chairman Bachus, Congresswoman Waters and Congresswoman Kilpatrick, Congressman Kanjorski, Congressman LaTourette. It is good to be here with you today. I appreciate this opportunity to appear to discuss the recent OPM report on hiring practices at the National Credit Union Administration.

    The report details prohibited personnel practices which violate the merit system by the use of false duty stations, the abuse of the Outstanding Scholar Appointing Authority, and the circumvention of veterans and displaced workers preference requirements.

    Before going into the details of NCUA's response to this report, I would like to say that the other members of the NCUA Board and I recognize that the OPM report raises very serious matters. We were deeply distressed to learn that OPM found certain of our hiring practices to be in violation of Federal Civil Service rules, and we are determined to correct and end these practices.
 Page 43       PREV PAGE       TOP OF DOC

    We all believe that applicants for jobs have the right to be treated fairly and regret that some injustices occurred. There appears to be evidence that these practices existed at NCUA for many years. This board will see to it that they end now, and are given zero tolerance henceforth.

    The board shares a unanimous commitment to bringing this agency into full compliance with applicable Federal law, and we have now agreed on what we believe is an effective and efficient strategy for fixing the problems identified in OPM's audit.

    Our strategy, which I will outline in a moment, was adopted unanimously by the board. This report, which OPM sent to all three NCUA Board members September 8, did not come to my attention until September 9, because I was out of the country on agency business. I had the report faxed to me on September 10, and read it for the first time at that time.

    On both September 9 and 10, I talked by telephone with Mrs. Bowné, our Vice Chairman, and Ms. Wheat, as well as various senior NCUA staff. I flew black to the United States the next day, Thursday, September 11, and arranged for a phone conference with the other board members about 6:30 that very evening. During that phone conference, I scheduled a board briefing for 9:00 a.m. on Monday, September 15. The purpose of the briefing was for staff to bring the full board up to date on their discussions with OPM and to make recommendations for the board to move forward expeditiously in dealing with this matter.

    On Friday, September 12, my first day back in the office, I contacted the Acting Director of OPM, Janice LaChance, and other top officials at OPM. Since then I have had other conversations with OPM about issues relevant to the taking of proper corrective actions.
 Page 44       PREV PAGE       TOP OF DOC

    We were informed the week of September 15 that the Office of Special Counsel will investigate this matter. An OSC investigator has already visited NCUA and met with both our General Counsel's Office and our Inspector General's office. The NCUA Board is committed to cooperating fully with this investigation as it proceeds.

    The agency's plan for addressing the violations noted in the report was approved by the NCUA Board at its last meeting, Thursday, September 25, as I said, unanimously. Under this plan, we already have contracted with an outside party acceptable to OPM to assist us in coming into full compliance. This contractor, the National Academy of Public Administration, a well-respected group, will be at NCUA starting today, working with our staff and the NCUA Board to see that all necessary corrective actions are taken, and that policies and procedures are put in place to assure that those unfortunate occurrences are not repeated.

    The plan also provides that, one, the board will establish an NCUA task force, which will be chaired by the Director of NCUA's Asset Management and Liquidation Center, J. Leonard Skiles. The task force will report directly to the board independent of any established chains of command or procedures.

    In addition to Mr. Skiles, the members of this task force are the Director of Examination and Insurance, David Marquis, our Associate General Counsel; Allan Meltzer, our Region VI Associate Regional Director, Bob Blatner, our Chief Financial Officer; Dennis Winans, and an outside consultant who will function as the Acting Director of the Office of Human Resources.

 Page 45       PREV PAGE       TOP OF DOC
    The task force will determine the budget, personnel and other implications of the report. The task force will provide briefings and recommendations for action by the board on an ongoing basis as necessitated by the corrective actions required in the report.

    To deal with matters related to the OPM report, meetings of the NCUA Board will be held at the request of any board member.

    Third, agency personnel heading the central offices charged with implementing and overseeing the operations identified as improper by the OPM have been placed on paid administrative leave pending the investigation into the circumstances surrounding the matters reported in the OPM report.

    Similarly, all heads of our regional offices have been ordered to withdraw from any further involvement in matters directly related to the OPM report. Of course, all personnel, without exception, will cooperate fully with any and all investigations and inquiries with regard to the OPM report.

    Number four, Region VI Director Daniel Murphy has been detailed to serve as Acting NCUA Executive Director and will report directly to the entire board.

    Mr. Chairman, as I said, the entire NCUA Board takes the allegations contained in the OPM report extremely seriously. Currently, a number of questions remain unanswered. As I mentioned, the Office of Special Counsel within the Justice Department has initiated an investigation into these matters. This investigation should provide us key information into the depth and circumstances surrounding the violations of personnel practices.
 Page 46       PREV PAGE       TOP OF DOC

    In conclusion, Mr. Chairman, I wish to stress again that we will do, I and the other members of the NCUA Board, will do whatever it takes to correct the problems identified in the report as soon as possible, and to see to it that they do not recur.

    I will be happy to answer any questions the subcommittee Members may have. Thank you, sir.

    Chairman BAUCHUS. Thank you.

    Ms. Bowné.


    Ms. BOWNÉ. Good morning, Mr. Chairman and Members of the subcommittee and Mr. Kanjorski. I thank you, too, for the invitation to appear before you today and to discuss the OPM report.

    The OPM report is unquestionably the most serious failure of agency administrative responsibility to ever occur at NCUA. I commend Chairman Bachus and the subcommittee for exercising their oversight responsibility in this case.

    Now that this failure has been discovered and brought to the attention of the NCUA Board, it is imperative that the full board be involved in meeting the requirements of the OPM report. The report was issued on September 8. As you know from the report, extensive corrective actions with deadlines for compliance are required in that report.
 Page 47       PREV PAGE       TOP OF DOC

    The seriousness of the report and the requirements to be met made it imperative that the NCUA Board become immediately and actively involved. The seriousness of the report and the requirements to be met demanded also that we begin assessing the budget implications and the program risk involved in compliance. The one thing no board member questioned was that we must and would comply.

    Ms. Wheat and I, in the absence of the Chairman, immediately brought together a group of senior staff and asked that they begin compiling information to aid the board in formulating a plan for corrective action.

    The full board met on September 25, 1997, to approve a bare-bones structure for starting corrective actions. This is a start, but I want to emphasize, as I did in my written statement, this is only a start. There is much to be done and it will require the full cooperation of the entire board acting as a unified body, making the best use of available staff and consultants and contractors that we may choose to hire.

    Having the outline of the plan that the board finally approved on September 25 has resulted in quick action to acquire the services of a group recommended and acceptable by OPM to assist us in developing the corrective actions. Further, as a result of that board meeting, we now have in place a group of NCUA senior staff to continue to assess the budget and the program implications and to help us move forward in meeting the OPM requirements.

    Also, as a result of that meeting, and as you stated earlier, Mr. Chairman, the persons who were implicated in the report have been put on administrative leave and are no longer involved in the efforts to correct. As a result of that meeting, we now have an experienced NCUA senior staff person acting as Executive Director to handle other agency responsibilities while this OPM correction is ongoing.
 Page 48       PREV PAGE       TOP OF DOC

    We are unable to fully assess the budget impact at this time because there are so many unknowns. We know there will be budget impact.

    Of major concern are the safety and soundness implications which attach to the corrective actions. Of paramount concern on the safety and soundness side is the potential separation of trained experienced examiners. In my written statement I have explained the timeframe for a new examiner to complete the basic educational and technical training and to gain the basic experience and knowledge needed to successfully do the job of examination and supervision.

    My written statement also details from an agency history the risk to the insurance fund when the number of experienced personnel assigned to safety and soundness exam work is insufficient.

    The OPM report identifies about 65 examiners who, because they were hired improperly, may need to be separated. More instances may be discovered. Moreover, we anticipate a loss per year of approximately 40 examiners just by normal turnover. We currently have 537 examiners. If the worst case were to develop and we lost 105 or more examiners, that would be a loss of about 20 percent of our examiners, which would be devastating to our program.

    The board will have to make some difficult decisions on how corrections will be made. There will most likely be extensive budgetary increases if we were to make a decision to keep those persons that we could have to separate, while at the same time hiring the people that were above them on the list, the people who had lost the opportunity for employment.
 Page 49       PREV PAGE       TOP OF DOC

    If we were to do that, and that may be the option that appears most safe to us, that would be an extensive budget increase. But it might be a very significant program risk if we failed to do that.

    While neither of these choices is attractive, I believe we all know that the safety and soundness of the industry we regulate must be our first priority. The NCUA Board takes ultimate responsibility for resolving this problem and restoring confidence in our agency.

    I trust, as Ms. Waters and other Members said earlier, the other interested parties, not only NCUA but OPM, Congress and the credit unions, will work together to solve the problem in a cooperative spirit so that we can get through this and get on with the very fine work that NCUA has and can do.

    Thank you again for the opportunity to be here, and I will be happy to answer any questions you have.

    Chairman BACHUS. Thank you.

    Ms. Wheat.


    Ms. WHEAT. Thank you, Mr. Chairman. Congresswoman Kilpatrick, Congressman LaTourette and Congressman Kanjorski, I believe I can now say good afternoon and thank you for inviting me to appear before you.
 Page 50       PREV PAGE       TOP OF DOC

    I have submitted a statement for the record, and in the interest of time, I will briefly elaborate on just one point. But if the subcommittee will allow me just this opportunity, I would like to personally inform the Congress that during this particular hearing, another hearing was taking place on the other side of the Capitol. Mr. Dennis Dollar went before the Senate Banking Committee and I understand that that hearing has been completed, and my personal experience notwithstanding, for some reason Ms. Bowné now thinks she will be leaving our agency sooner, rather than later.

    I think it is important for the Congress to know she has provided exceptional leadership as Vice Chairman. She has helped this board develop sound and reasonable policies and practices affecting both the credit union industry and employees of the NCUA. She has earned the appreciation and respect of her peers. She has expended considerable time, energy and effort to ensure the continued safety, soundness and growth of the credit union movement.

    Partisan politics has no place at the NCUA, and as the Chairman has indicated today, it plays no part in these hearings today. But I have very much enjoyed working with, and in a bipartisan effort with Mrs. Bowné for the last year-and-a-half, and will be sorry to see her go.

    As previously stated, the NCUA Board fully supports the merit system principles, and as outlined in our various statements, we have taken concrete steps to correct the problems and to create an environment which guarantees fair and open competition for all future Federal Government employees.

 Page 51       PREV PAGE       TOP OF DOC
    After receiving the OPM report, it became obvious that internal reporting and review structures which should have either prevented abuses, or at the very least alerted us to them, had broken down or were altogether missing. Today, you have provided several documents that I have never seen before and daily more and more documents become available to us.

    Again, this is why we continue to welcome the outside review of the Office of Special Counsel and why we need to continue with our immediate internal review by an independent third party professional.

    OPM's previous report on the NCUA performed in 1996 did not, as it should have, trigger additional internal scrutiny of this agency's hiring practices. A copy of the OPM 1996 audit, which cited systemic statutory violations, was not used internally by the NCUA to review our practices and was never delivered to the Inspector General who is responsible for internal audits of the key functions of the agency.

    In fact, our Inspector General did not learn of the existence of that 1996 audit until his review of the recently delivered 1997 report. If that 1996 OPM report had triggered an audit by the Inspector General, perhaps some of these violations would not have occurred. But it is clear that review of NCUA practices and procedures is necessary and overdue, and I want you to know it is also welcome.

    External audits and reports on the agency's operations, such as those from Congress, the General Accounting Office, the Department of the Treasury or trade associations, must receive the serious attention that such recommendations and/or constructive criticism merit.

 Page 52       PREV PAGE       TOP OF DOC
    I have heard from several subcommittee Members today that credit unions deserve better from their regulator, and I could not agree more. If given the opportunity, I commit to do my best to ensure that their regulator meets the highest standards and holds accountable ourselves as well as all those involved in such practices in a manner as we would expect of a credit union cited under similar circumstances.

    Because, just as the NCUA focuses on risk assessment as a significant part of our examination of credit unions, our internal assessment and reporting structures must be able to identify risks to the agency.

    Mr. Chairman, I would be happy to respond to any questions from the subcommittee.

    Chairman BACHUS. Thank you. I appreciate that. First of all, Ms. Wheat, you mentioned the confirmation hearing in the Senate. We also, this subcommittee, I can only speak for myself, but I am sure they would agree that your confirmation is something that we all look forward to, and I know that I will be writing a letter to the Senate particularly in light of the events in the past two or three months and urge them to get on with your confirmation. I am sure that other Members will join me in that.

    Ms. WHEAT. Thank you.

    Chairman BACHUS. I think, as I said, I was very impressed by your statement. As a brand new member of the board, you already have quite an understanding of the workings of the board. I think you are going to be a very positive force on the board.
 Page 53       PREV PAGE       TOP OF DOC

    Ms. WHEAT. Thank you.

    Chairman BACHUS. I commend you.

    Let me start out, there have been many references here that the Executive Director and the Director of Human Resources, who were implicated in the report, they were requested by the board at the September 25 meeting to be placed on administrative leave with pay.

    Can the members tell me whose idea that was, who originated that idea, which I believe is a correct idea, but was it a unanimous decision? Who suggested it? Did anyone oppose that at first?

    Mr. D'AMOURS. It was a unanimous decision, Mr. Chairman.

    Ms. BOWNÉ. It certainly was a unanimous decision. I would state that earlier, at the first reading of that report, my judgment, along with having talked with the IG, was that these people should not be involved in any corrective actions that would be taken. Ms. Wheat and I both joined together and issued a memorandum to the two of them not to be involved in any corrective actions.

    Chairman BACHUS. That was prior to the action by the board?

    Ms. BOWNÉ. Yes. My memory is that that was on September 9. We got the report on September 8. I believe that memorandum was on September 9. Certainly no later than September 10, but I think September 9. We advised them that they should not go forward in taking any of those corrective actions based on the report we had read and the fact that this was being referred to Special Counsel.
 Page 54       PREV PAGE       TOP OF DOC

    They did not conform with that. They continued to go forward, and, in fact, met with OPM and went over it. In the meeting that was cited by the Chairman, which I believe was on Monday, September 15, they came back and reported to those assembled there what had gone on at OPM.

    I was further concerned that they were continuing to be engaged. First, they had been directed not to, but they had apparently felt that they could or had received another direction. But I didn't get the comfort level we were going to get the best information.

    For instance, statements were made like, ''Well, OPM really doesn't want us to have to separate people,'' and ''OPM really doesn't want us to not have this hiring authority. They want us to get it back.'' That could have been a comfort to me had I not just spent six years on the other side of regulation, where we don't want credit unions to be Code 4, and we don't want them to be under an LUA. But it doesn't mean we are going to give them a pass on the conditions that got them there. We want them not to be there, because we want them to improve. That is what I tried to get across to them, that they needed to give us real information, not those things, because I think all of us, because of our regulatory experience, knew what those statements meant.

    It meant ''We don't want to keep you under our thumb. We want to do better.'' This didn't mean there was going to be any change in OPM's requirements of us, or that we could take all the time getting around to making the decisions on how we would do corrective procedures.

 Page 55       PREV PAGE       TOP OF DOC
    Chairman BACHUS. I notice you said you originally thought that the two senior officials who had been implicated should not participate in any corrective actions, and Ms. Wheat joined you in that opinion.

    Ms. BOWNÉ. Yes.

    Chairman BACHUS. Chairman D'Amours, did you initially support their instruction to these two staffers?

    Mr. D'AMOURS. No, I did not. First of all, I think it should be said when that instruction was given, it was not given as a board action. It was given by two board members while I was out of the country. I was out of the country when this occurred. I did not come back until two days later.

    But I did speak to both board members on the phone, and I want to clarify the answer I gave to your question about the administrative leave, that the Executive Director and the Director of OHR have been placed on. That was a unanimous decision.

    What Mrs. Bowné is referencing is not administrative leave. What she is referencing is merely a request they not participate in any way in any of this. As a matter of fact, that request would have allowed other people, who I now believe should not be participating in any of this, to have continued participating in an enhanced position.

    My view at the time was that since OPM in its letter to the Executive Director requested that he continue working with OPM and stay in touch with them on a monthly basis, that there was no hearing. The board did not have any information upon which to base a decision as to who should and should not step aside, be recused, or whatever; that I thought it was prudent and appropriate that the board should convene and be briefed and gather information and then take whatever actions it thought was appropriate, not take actions, hold a meeting, take actions, and then be briefed. It was not until I saw a memo, oh, about, I think, a week or less than a week ago, of January 24, 1996, by our Director of OHR, which was copied to the Executive Director, that I thought that not only recusal, but administrative leave was appropriate.
 Page 56       PREV PAGE       TOP OF DOC

    Chairman BACHUS. All right. We have 10 minutes, so we will take questions.

    Ms. Kilpatrick.

    Or would you rather recess?

    Ms. KILPATRICK. Can we vote first and then come back?

    Chairman BACHUS. We are going to recess at this time and then come back and have additional questions.


    Chairman BACHUS. The Oversight Subcommittee is called to order.

    Ms. Kilpatrick, I think we were asking questions.

    Ms. KILPATRICK. Thank you very much. And to the board members, first of all, let me say I appreciate your candidness, your statements and forthrightness in trying to get to the bottom of this so the millions of Americans who do use credit union services can continue to do that, and we certainly keep the institution in high esteem, which we all hold it. I think I want to ask, after reading the testimony and hearing from both OPM and yourselves, was there ever a time that the board members, either individually or collectively, were apprised by either the Executive Director or the Director of Human Resources of exactly what their hiring practices were?
 Page 57       PREV PAGE       TOP OF DOC

    Mr. D'AMOURS. Congresswoman, this situation was first called to my attention either in late July or early August when there was some—the Executive Director informed me that OPM was considering taking on authority, and that there were problems with the Outstanding Scholar Program. But he went on to tell me he was working with OPM on this, and he thought that, just as we had had difficulties resolved in the 1996 visit, he thought these matters would be worked out.

    Ms. KILPATRICK. Ms. Bowné.

    Ms. BOWNÉ. Just before this report was actually due, was coming out, two letters crossed my desk that raised my level of concern. I had not been apprised of the 1996 report. The letters, one was from Ms. Linelholm over at OPM, and it used the word ''seriousness'' of the violations. The word ''seriousness'' caught my attention. Then, a letter came out of Kansas City that said they would be doing our hiring, that part of our work also. Along with that, about the same time, I think Mr. King was leaving OPM, and there was an article about how OPM was downsizing and more things were being done in the agencies.

    I use that to say all of these things caused me to have concern. As to the first letter, and the ''seriousness,'' I had talked to both the Executive Director and to Ms. Foster and asked, ''What is this about?'' And it was their explanation that, yes, there had been some things going on, but that we were probably going to make this all right, because Region VI and Region I didn't have any of these problems, so, their intent was to go back and suggest to OPM we let hiring go through those regions. They did not raise a level of seriousness until this report came out.
 Page 58       PREV PAGE       TOP OF DOC

    I asked specifically why did they think, in the light of the fact that I had just read, assuming The Washington Post was right, about what had happened at OPM under Mr. King who just retired? Why they would be taking on this amount of work when that was not what their current practices were?'' I didn't get an explanation of that. I remember a term got used. Ms. Foster said, ''Well, the region has gotten a little creative, and perhaps I should have been giving it more oversight.'' But nothing that said this is a serious report.

    I suggested to her, then, ''You must have some idea of what this report is going to say, because you have been interviewed, I suppose, all of you.'' But I got nothing that said this is a really serious thing that is about to happen. I asked how long she thought it would be before we got our hiring authority back? She said it was going to be a while, but that it would be returned.

    I was dissatisfied with the answers, and I called Ms. Okin over at OPM. This was probably a week, or a little more, before we actually got the report. I called Ms. Okin and learned from her that they, indeed, found it very serious. She used some terms in that conversation that, again, heightened my concern. And then she said that they had been delivering the reports to Mr. Hoyle, and I explained to her that this agency was managed by a board and we would want to see the reports. That is when she said she would have the reports hand-delivered to each board member.

    At that point I had a very high level of concern and was calling every couple of days and saying, ''is this report ready yet?'' It wasn't until I read the report, which arrived during the late afternoon on September 8, and I came back to town on the morning of September 9, and it wasn't until I read the report that I realized just how truly serious it was.
 Page 59       PREV PAGE       TOP OF DOC

    Ms. KILPATRICK. Thank you.

    Ms. Wheat.

    Ms. WHEAT. Congressman Kilpatrick, having come from the private sector, I will admit when I received a copy of the August 8 letter pulling the hiring authority from the agency, it didn't—I don't think I fully appreciated what that meant.

    When I asked staff about it, specifically the ex-Executive Director, he indicated to me that OPM was performing a routine audit, which apparently they were. We were aware they were going to be coming back to review us in 1997 based upon the 1996 report.

    Again, I had never heard of nor seen the 1996 report. He indicated that we were going to be involved in a routine audit, and that some issues had been raised, but that we were working through the issues and he was confident we would resolve them, and he hoped that we would receive the hiring authority back as soon as we resolved the issues.

    He indicated his belief that when the issues were resolved in the report, everything would be satisfactory, so he kept pushing for the report. He kept indicating that OPM wasn't working fast enough for us, that it was damaging and harmful to the agency, that they had yanked the authority while pursuing a routine audit. But at no time did he go into any detail about the kinds of things that were put in the report.

    When I received the report on September 9, I immediately called the General Counsel and gave him a copy of it, and I immediately called the Inspector General and gave him a copy of it. The Inspector General gave us, the entire board, his written opinion that any and all people implicated in the report should immediately be removed from any further involvement with respect to the matters set forth in that report, and it was on that day, which I believe it was September 10, that Ms. Bowné and I sent letters to every regional director, the head of our AMAC, as well as the Executive Director and the Office of Human Resources asking them to remove themselves from any further involvement until further notice from us.
 Page 60       PREV PAGE       TOP OF DOC

    I called Chairman D'Amours in Ireland and I informed him of this action, as well as sending him a memo with all of the attachments, so he would be aware of the decision that we had made, because he was out of the country when that decision was made, and he did not agree with that decision.

    Ms. KILPATRICK. So the report was issued, I think, on September 8, or thereabouts.

    Ms. WHEAT. Yes.

    Ms. KILPATRICK. Since that time, the referrals have been made to the Special Counsel and the memo we received from the Chairman here overnight, we see that you all have listed several things that you are going to implement. We heard from OPM this morning that as you implement those things, they will take another look at your hiring and whether you should receive it back or not.

    I am happy that you are, though you may not have known the seriousness of it, when you did find out, each of you in your own right did act. That is to be commended. I am happy the people are on administrative leave. I wish without pay. My taxpaying constituents would not want to see that going on. I want to bring it to a close and make the institution whole again.

    How long will it take to implement the various things that you have outlined in your memo, Mr. D'Amours? How long will that take? I am trying to get at when the institution can be whole and back to its reputable state that I want to see?
 Page 61       PREV PAGE       TOP OF DOC

    Mr. D'AMOURS. Yes, Congresswoman. We want that as much as you do. The time lines in the report extend out to approximately 120 days. We have, as a result of carefully considering this thing and discussions with OPM, we brought in an outside consulting group that I referred to earlier to put the facts together, put the plan together, working with a special committee we have got within NCUA, to get to the implementation phase as quickly as possible.

    I don't think, as OPM said earlier when you asked that question, I don't think it is possible right now to say specifically when that time will be, because we are still marshalling our forces and our facts. But I would hope that the 120-day timeframe that OPM suggested—or I shouldn't say suggested—required, could be met, and I will be working with my fellow board members, with the outside consulting group and with our internal committee, to see to it that we do meet those timelines, if at all possible.

    Ms. KILPATRICK. Mr. Chairman, lastly, could the Special Counsel issue its findings or recommendations or actions while this 120 days is going on, and is that likely?

    Mr. D'AMOURS. I am afraid I don't know, Congresswoman. The Special Counsel has been in touch with our Inspector General and with our Office of General Counsel. They may have a better feel for that than I. I suspect they do not. I misspoke earlier when I said the Special Counsel was a member of the Justice Department. That is my mistake. They are not. They are an independent agency reporting, presumably, directly to the President. I have no ability to influence the progress or the process of their implementation.
 Page 62       PREV PAGE       TOP OF DOC

    I hope they will get to it within 120 days or less, but I am in no position to say.

    Chairman BACHUS. Mr. LaTourette.

    Mr. LATOURETTE. Thank you, Mr. Chairman. I have been heartened by not only the written statements, but also the oral statements today, and the words I wrote down that came from one or all of you is ''zero tolerance for what has occurred.'' I think that is a good phrase, Mr. Chairman. You will do whatever it takes to get to the bottom of it and clean it up. That is a good phrase. Ms. Bowné mentioned ''We want to restore the safety, soundness and security of the credit union industry.'' That is an admirable goal. And get on with the fine work.

    A couple of you mentioned ''growth.'' Mr. Kanjorski and I and others want to see the growth of the credit union industry in a way that is productive and people have confidence in.

    A couple of things concern me. As you move forward with the recommendations of the personnel management folks and also some internal investigations that you have going on, I was handed a statute that controls some of the difficulties you have encountered and who is responsible for some of the failures of communication and hiring practices. If you turn to Title IV, Section 2302(c) of the United States Code, it specifically indicates that the head of each agency is, if you delegate personnel decisions to others, is personally responsible.

 Page 63       PREV PAGE       TOP OF DOC
    Based upon my reading of that statute, that makes the board ultimately responsible for what has occurred. As I listen to each of you respond to Ms. Kilpatrick's questions, I have reached the conclusion, and if you disagree with me, I invite you to correct me, but I don't reach the conclusion that any of you as board members were adequately informed of the employment practices of the agency that came under the microscope of OPM.

    In that regard, there is a question in there someplace, and the question is, as I have prepared for the hearing, I read some newspaper accounts. I am aware that OPM notified you by letter on August 8 that your hiring authority was being decertified. But unless I am incorrect, there was not a meeting of the board on this particular issue, although there were some telephone conversations and memoranda going back and forth, until September 25. My question is, as I looked at some of the not only previous testimony that this subcommittee has taken, but also some of the rules and regulations that have controlled how your board meetings are established, I would hope that as you reform and get to the bottom of the difficulties that now face the agency, based upon your statements I am sure you will, whether any of you have any thoughts about the board policy that only the Chairman can set agenda items and that if the two of you or any new board members wanted to place something on the agenda, you have to wait for 60 days.

    If something jumps out at me, it is that 60 days in this case was too long. Perhaps when the letter of August 8 came, if any of you felt it was important and you had the right information to have a hearing and discuss it as a board, perhaps that would have been better than waiting until September 5. Mr. Chairman, why don't I start with you?

    Mr. D'AMOURS. Thank you, Congressman. I appreciate your comments.
 Page 64       PREV PAGE       TOP OF DOC

    There was no attempt by any board member to request a board meeting on September 8, or September 9, for that matter. The request came after the report was released.

    I would also like to say that the authority that the Chairman of the NCUA has, prior Chairman of the NCUA have had, the Chairman of the FDIC has it, the Chairman of the Federal Reserve has it, the Chairman of the SEC, most chairpersons of Federal agencies, as I guess in Congress, have authority to set agendas.

    In point of fact, before I got to the agency, the Chairman's authority was even more unlimited than it is today. It was under my chairmanship that we passed a modification allowing two board members to put an item on the agenda with a 60-day waiting period.

    I think it is important to understand that this power is not unique to NCUA. Its exercise in this case was not improper. There was no damage done in the period from when the hearing was first requested to now. The matter was handled well, the matter was handled appropriately, and I would suggest, in fact, that the delay improved the process. I think we have a better system now with better people in place than we would have had had we acted precipitously.

    For instance, we would have had people controlling information flow that I think properly should not be controlling information flow. Bringing in an outside consultant that is approved by OPM, I think, was a big step forward and it would not have occurred had we not taken time.

    All I am suggesting, sir, is whatever the full board wants to do, the full board could do. But I don't think anybody understood the seriousness of this question until perhaps maybe a week or two ago when documents began to surface and come to the full board's attention. But the truth is no harm was done, and I think it is important to keep in place structures and procedures that are orderly. And a Chairman should, because he has or she has the ultimate responsibility, should exercise authorities very carefully, but can properly exercise delegated authorities, to protect the agency.
 Page 65       PREV PAGE       TOP OF DOC

    Mr. LATOURETTE. With the Chair's permission, if I could invite the other two panelists to answer the question, I want to interject I never intended to imply by my question that you, Mr. D'Amours, did anything improper.

    Mr. D'AMOURS. I am sorry, my staff person advised me I misspoke. I said no meeting was requested on September 8 or 9. I was referring to the point you had established of August 8 in your question. I misspoke and said September. I meant August.

    Mr. LATOURETTE. Before Ms. Bowné—does that mean one was requested after September 8?

    Mr. D'AMOURS. Yes. As a matter of fact, when I was still out of the country, by telephone, there was a request for an immediate board hearing, and I suggested it might be better to get a briefing and gather some facts before we started recusing people and putting people in positions of authority. It was best to get a handle on what was going on.

    Mr. LATOURETTE. Before I invite the other panelists to respond, again, I think you were talking to one of your staffers. I am not implying you did anything improper.

    Mr. D'AMOURS. I am aware of that. I wanted to make the correction. I wasn't aware I said ''September.'' I meant to say ''August.''

    Mr. LATOURETTE. Ms. Bowné, do you have any observations about my question?
 Page 66       PREV PAGE       TOP OF DOC

    Ms. BOWNÉ. I do have. I think there are three issues raised here which are important and should be talked about and have made problems at the agency, and this situation, the OPM report highlights all of those, I think.

    The first one is the agenda. It is true that it has changed; it was changed, I believe, in 1996. Prior to that, the reference that it was more restrictive, I have a different take on that. There was some action taken by a prior board that everybody who remembers that action, and everything in the record says that was a housekeeping or administrative sort of action that basically said the Chairman has responsibility for the ''final'' agenda. Prior to that, the rule had said the ''initial'' agenda.

    Everybody at the agency who worked on that hardly remembers it, because they said it was just a sort of housekeeping thing. The board members who voted on it at that time said they never intended it to restrict any members from actually having access to the agenda. It merely meant that somebody has to finally say, ''Yes, this is the agenda we are going forward with'', and that is what it meant.

    It was interpreted by Chairman D'Amours, by Mr. Hoyle, and also initially by our general counsel, to say that, yes, that meant only the Chairman could put an item on the agenda. I didn't know of that interpretation until there was an item that I wanted on the agenda; and it was the first time I had ever been turned down, and this reference was used.

    Although there was another vote on that item requiring two members and 60 days, I think the fact that when this report came out, two members recognized the seriousness, and yet we were unable to get a meeting for close to two weeks, and we had short timeframes, points up the problem. The first timeframe we had to meet was 30 days, and then we have some 90 and 120 days. It seemed to me essential that we get started on this.
 Page 67       PREV PAGE       TOP OF DOC

    On the same day that we asked, or told the persons who are now on administrative leave not to participate with OPM in the corrective actions, we also pulled together a group of people in the agency who had information we would need, who could evaluate the report and give us, as close as anybody could at that time, potential budget implications, and certainly the safety and soundness issues. It was an informal group that we just wanted to get started immediately so as soon as we could get a meeting, we would have the information and could start making some informed decisions.

    They were advised not to meet by the General Counsel because that was improper, and the Chairman's attitude was only he could form a committee. Our intent was not to usurp that authority. It was merely to get started in the absence of the Chairman and get information flowing. I think any responsible board member would have looked at it that way.

    It became almost a donnybrook within the agency, and the focus changed from getting the information to who had the right to ask for it. That went on for a number of days. All of those things were part and parcel of why it took us until September 25 to finally get a meeting.

    The delegations, and you have mentioned those, are another factor. They are delegations that are delegated by the board to the Chairman who can redelegate into other places within the agency to carry on the day-to-day activities of the agency, to carry out the policies set by the board. It is not to implement policy. That was being done here, and the OPM problem is what happened at this level.

 Page 68       PREV PAGE       TOP OF DOC
    One of the things that I thought was appropriate immediately, so that couldn't continue, was to pull those delegations until we could get a handle on this report, and both board members asked that be done. That has not been done.

    Now, those delegations in the hands of responsible staff would be no problem. They must be handled responsibly.

    Mr. KANJORSKI. I appreciate the dissertation, but I am not sure we are here for the purposes of going into this.

    Ms. BOWNÉ. I apologize if I got off track. I intended to be answering the question.

    Mr. LATOURETTE. You did and I appreciate it. Is it still appropriate for Ms. Wheat to make any observations before Mr. Kanjorski asks questions, or is that inappropriate?

    Chairman BACHUS. We have sort of allowed questioning. I would certainly like Ms. Wheat to answer.

    Ms. WHEAT. I should have written the question down. I will try to respond.

    Chairman BACHUS. You don't have to.

 Page 69       PREV PAGE       TOP OF DOC
    Ms. WHEAT. I will say that, in my view, a couple of comments from the Chairman, I would just like to respond to them. One is that it was his belief that it was not necessary to hold a meeting. In fact, we did not meet until September 25. When I spoke with the Chairman on September 9, I asked for a meeting verbally over the phone and was told, ''no.''

    I was the one who wrote that barrage of internal memos that you may be referring to, putting in writing a request for a meeting. I submitted the Form B–1's that are required under our rules and regulations asking for a meeting. I submitted Form B–1's asking for a special meeting. I asked that this matter be added to the regularly scheduled September 22 meeting. So obviously from those requests, I felt from my reading of the report that it was critical for this board to step up to the responsibility we were required to uphold and address this report.

    I did so because of not only the nature of the report itself, but the fact that the people who had been giving me information about what that report had, I had come to question, and it was for that reason I felt it was important to get information from other sources, ask them to recuse themselves. And to suggest that no damage was done because we waited so long, I don't know if that can be true. I know when I get a report that alleges the falsification of records and tampering with records, having a legal background, the first thing you want to do is remove the people who may or may not have allegedly done such a thing. Those same people were allowed to have access to records for several weeks.

    I did request of the General Counsel that he send out a memo to all personnel asking them to retain all records, even those records that would be normally discarded or archived because of my concern that the Office of Special Counsel have any and all records available to them during this interim when we were not meeting as a board.
 Page 70       PREV PAGE       TOP OF DOC

    And finally, to suggest that the delay improved the process is just not something that I can agree with, because anyone who has been a part of this process knows that the credibility of the agency has been called into question and our handling of this matter has been called into question. I hear Congressman LaTourette, I think, moving in the direction of suggesting that we need to continue to look within our own rules and regulations and our internal structures to determine what we can do to prevent this from ever happening again. I do not think it is appropriate for an interpretation of that rule or regulation to have prohibited this board from meeting, particularly when a majority of the board requested that we exercise our responsibility.

    Chairman BACHUS. Thank you.

    Mr. Kanjorski.

    Mr. KANJORSKI. It sounds to me like we have a committee of chief executives here, the three members all want to equally run this board for some reason. That's what I'm starting to hear. And I'm just wondering whether we should pass some legislation requesting the President no longer designate a Chairman?

    I think this is a very serious thing, but I want to make a point. It is a personnel regulation violation, first and foremost.

    Ms. Wheat, do you have any reason to believe that the safety and soundness of the credit unions of the United States are at risk as a result of what happened here?
 Page 71       PREV PAGE       TOP OF DOC

    Ms. WHEAT. Our own key financial officer, as well as our Director of Examination of Insurance, after reviewing this OPM report, both raised safety and soundness concerns.

    Mr. KANJORSKI. What were these safety and soundness concerns? If so, we should put the American people on notice and credit union movement on notice. What safety and soundness problems to the credit union insurance fund did this problem cause?

    Chairman BACHUS. Mr. Kanjorski, I think she said that other people raised those concerns that she——

    Mr. KANJORSKI. Well, I would like—if they did——

    Chairman BACHUS. I'm not sure if she——

    Mr. KANJORSKI. Well, what do you know of what safety and soundness—you were the one here that said there's some question of safety and soundness. Now, that's important to me. What problems do you know of your own knowledge involving safety and soundness of the credit unions?

    Ms. WHEAT. Two days after we received the OPM report, we asked both the chief financial officer of the NCUA, as well as our Director of Examination and Insurance to review the report and report back to us immediately any budgetary impact.

 Page 72       PREV PAGE       TOP OF DOC
    Mr. KANJORSKI. No, I'm not talking about internal budgetary impacts of your administration. I'm talking about——

    Chairman BACHUS. Mr. Kanjorski, I guess we need to let her answer the question.

    Mr. KANJORSKI. I do want her to answer it, but that's not an answer. Are you talking about safety and soundness of the agency? Are you talking about safety and soundness of the credit unions? Those are very emotional words, ''safety and soundness.'' And what I'm asking you now as a Member of the Banking Committee, do you have any personal information that puts in question the safety and soundness of the credit unions of the United States that you are in charge of regulating?

    Ms. WHEAT. Mrs. Bowné, in her statement, outlined several issues with respect to safety and soundness concerns which were in a worst case scenario.

    Mr. KANJORSKI. What are they that she outlined?

    Ms. WHEAT. Well, I will let her speak to that.

    Mr. KANJORSKI. I listened to her testimony, Ms. Wheat. I didn't hear her outline any safety and soundness concerns. You were the one that used the term ''safety and soundness.'' I'm just asking you of your own knowledge now; it's a simple answer, yes or no? If you answer that question, then I'll ask you what.

 Page 73       PREV PAGE       TOP OF DOC
    Chairman BACHUS. Mr. Kanjorski, I think we need to give her an opportunity to respond.

    Ms. WHEAT. I would be very happy to respond.

    Mr. KANJORSKI. All right. Do you know, of your own personal knowledge, of any safety and soundness problems to the credit unions as a result of this occurrence?

    Ms. WHEAT. The potential for safety and soundness concerns exists, Mr. Kanjorski, because, as outlined in Mrs. Bowné's statement, which we received from the senior officials who are responsible for giving us this information, the NCUA has a cadre of accounting professionals who are responsible for examining every single Federally-insured credit union in a 12-month cycle.

    If, as a result of taking the corrective action required under the OPM report, taken together with our current attrition rate of 7 percent, we stand to—in a worst case scenario—we stand to lose close to 20 percent of our examining staff. That reasonably posed a safety and soundness concern to our Director of Examination and Insurance, as to how do we complete an examination program without the people to do the work?

    Mr. KANJORSKI. Ms. Wheat, that causes an auditing problem; that does not cause a safety and soundness problem. Those are very emotionally charged words. That means whether or not the institutions are secure.

 Page 74       PREV PAGE       TOP OF DOC
    Ms. WHEAT. We're not questioning that the institutions are secure.

    Mr. KANJORSKI. You're suggesting that the institutions may not be audited by the 5- or 10-percent of the auditors that are lost if the worst case scenario occurs.

    That's not safety and soundness; that's auditing tools that may be lost.

    Ms. WHEAT. And I don't mean to disagree with Mr. Kanjorski. The credit union system is safe and sound as far as we know it, and we expect to keep it that way.

    Perhaps Mr. Kanjorski's point is well taken, that the safety and soundness concern that's being referred to is a safety and soundness concern internal to the agency, that has an impact on our ability to timely assess the safety and soundness concerns out there in the credit union movement.

    Mr. KANJORSKI. Aren't there millions of things that can be done to resolve the problem? You can contract out for services. You can borrow auditors from the Federal Reserve System, FDIC, or the Comptroller of the Currency, or many other agencies.

    Ms. WHEAT. Those are issues and suggestions that we will look into as a board, yes.

    Mr. KANJORSKI. So this is not a crisis. What I'm trying to point out, look, what happened here should never have happened. What happened here is something that's wrong. But to raise it to the level of emergency, to throw out due process, to take precipitous action to maybe destroy the lives of people that may not be involved or are involved, but no one quite knows in what way they're involved. I don't necessarily believe that, in the absence of thorough information and thorough briefing, there was any improper activity here that occurred for about 12 days, as I gather from reading, between the time everyone had the information and the final resolve was made.
 Page 75       PREV PAGE       TOP OF DOC

    It would seem to me that you're all coming here and saying, you know, this was a donnybrook down there. Quite frankly, what are we talking about here? We're talking about, I think, about 15 examiners that were hired because false duty stations were used; is that correct?

    Ms. WHEAT. As well as 49——

    Mr. KANJORSKI. And then we had 49 Outstanding Scholar Program——

    Ms. WHEAT. Yes.

    Mr. KANJORSKI. Let me ask you on that. From what I'm gathering and why I don't think it's such a terrible emergency, as I understand, the agency had had that policy in effect for years. They had asked the Office of Personnel Management to review it for years. The program was approved for years. So it was just at this particular point that they discovered that it wasn't properly being implemented; isn't that correct?

    Ms. WHEAT. As I understood Ms. LaChance earlier, with Ms. Okin, they did not answer the question because they didn't have the information as to when the last time the NCUA had been internally audited. When we were audited in 1996, the systemic statutory violations that they referred to had to do with additional educational requirements that had been illegally added. From their own account, they did not detect the improper use of the Outstanding Scholars Program during that 1996 report. It only came to their attention in 1997.

 Page 76       PREV PAGE       TOP OF DOC
    Mr. KANJORSKI. Has anybody discovered why this was done yet of the three members of the board? I mean, was there a payoff involved here? Any bribery?

    Mr. D'AMOURS. Mr. Kanjorski, this matter is being investigated by the Office of Special Counsel. I have no—and I would think I could speak for the board and say that none of us have any such information, but we're not in a position until the matter is fully investigated. And I would suggest commenting, if my board members agree with me—from head nodding, I can see—it's just too early to draw conclusions as to where this investigation can go.

    But as OPM said, they found—as Janice LaChance testified this morning, OPM checked into this and they found nothing that would seem to indicate that friends or relatives or special—people hired for special, personal reasons——

    Mr. KANJORSKI. And I understand you also respond to my question, that everybody in fact who was improperly hired was qualified?

    Mr. D'AMOURS. Yes.

    Mr. KANJORSKI. So we don't have a bunch of butchers in here doing the auditing; we have examiners that just didn't qualify. That's bad. That's not what we want in the Federal system, but we don't have butchers doing auditors' work here. We have people that were auditors, probably second or third on the list and would have been hired under various circumstances, or could have qualified to be hired, certainly. I'm just worried, from the accounts I've heard of this whole thing, that internally within the agency, whatever is happening in that agency, it seems to be that this is an opportunity for people to score some points. And I'm wondering whether or not it serves the agency well, if there is some discord in the agency and people are using it to score points?
 Page 77       PREV PAGE       TOP OF DOC

    That's why I'm coming down on the three of you. I think it is your responsibility to take one step back, find out what happened, find out whether there are extreme emergencies involved. And certainly, if there aren't, if there aren't safety and soundness problems where institutions are about to fail, I think you can take 10 days to have due process and fairness as to response to activity.

    Chairman BACHUS. I thank the gentleman. I will point out that the agency was decertified on August 8, and there was not a board hearing until September 25.

    Mr. D'AMOURS. Mr. Chairman, if I may, that's correct, but on August 8, I don't think any of the three board members understood the seriousness of this situation, nor was a meeting of the board requested by any of the board members until after the report came out, which was a full month later.

    Chairman BACHUS. Well, nonetheless, they were decertified. The agency was decertified on August 8, and that should have been an indication of the seriousness. And as Chairman, I think you have some responsibility there. I think you would agree.

    Mr. D'AMOURS. I would agree, sir, that on August 8, had I, as Chairman, or the other two board members understood the seriousness of this question, we would have acted—taken some more action than we in fact took. But it——

    Chairman BACHUS. The delay was from August 8 until September 25.
 Page 78       PREV PAGE       TOP OF DOC

    Mr. D'AMOURS. Well, I just say again, Mr. Chairman, that none of the board members on August 8, recognized that this was something that required any immediate action, or the seriousness of it. We all, I would suggest, believed that it was a compliance problem that we had with OPM that would be resolved in the regular course of business. The size and complexity of this problem did not hit any of us until we actually saw the report.

    Chairman BACHUS. Let me make a follow-up on Mr. Kanjorski's line of questioning.

    Ms. Bowné, there's been talk in the press that the NCUA is a dysfunctional agency. Since your term is over and you have seen a wide range of events at NCUA, what are your thoughts on this characterization?

    Ms. BOWNÉ. ''Dysfunction'' is a word that has been used, unfortunately, for our agency. But it's mostly been used for our board, I believe, that we're a dysfunctional board. And in the sense that there isn't communication, that there isn't timely communication, the board is dysfunctional. Areas of concern are not being addressed, such as delegations being misused, and no way for the board members to get that on the agenda. We can't pull those delegations back when we see this, because you have to have a meeting to do that, and you have to get it on the agenda in order to take action.

    So there's no timeliness for board members' concerns being met.

    The agency has in the past, since its inception, operated very well, has had stellar performance. It has good people. It has good people trained to do their jobs. It has good regional level leadership from the—again, from the time of its inception until just in the past few years. The agency went through the 1980's where in other industries, there were a lot of serious problems, and handled our problems very well.
 Page 79       PREV PAGE       TOP OF DOC

    The previous boards have stepped up to the plate and done some things that were unpopular, like recapitalizing the insurance fund when that was needed, and assessing a premium; which has given us the opportunity to return some of those premiums. The credit unions—in going to back to Mr. Kanjorski's statement—are not at risk at this moment because they're safe, and that's a good thing.

    Chairman BACHUS. I took Ms. Wheat as saying some of the internal operations of the agency, I think she made that clear that——

    Ms. BOWNÉ. The safety and soundness issue, in my view, is part of what is dysfunctional about the board activities in this agency. While the credit unions are certainly safe, historical data that was in my written statement, shows that at times when you don't have the cadre of experienced examiners, there has been significant impact cost to the insurance fund.

    So the safety and soundness question is how we go forward to deal with this problem and not create a safety and soundness problem down the road.

    As Ms. Wheat said, our problem is internal. If we were to lose these experienced examiners, we could not complete the program. That could be, and historically has proven to be, costly to the insurance fund. That's what the safety and soundness issue is.

    But, it also again speaks to the dysfunction of a board that, in something as serious as this, can't get an immediate meeting for the board to sit down and make some judgment decisions on what we need to do to go forward and communicate to staff. Instead, we have staff going forward without board direction, perhaps taking steps that the board would not, and could not, approve; and in addition to that, we couldn't even, as a majority of the board, stop the people who had been implicated when this report had been referred to Special Counsel. Now that's a serious situation.
 Page 80       PREV PAGE       TOP OF DOC

    We were very clear, I thought, certainly I remember several times saying, ''I want to have a meeting to deal with the audit and how we get in compliance and how we proceed, because of the short timeframe. Special Counsel is going to deal with the investigation, but we need to go forward.''

    So, in that sense, to answer your question, I would not like to leave you thinking that NCUA does not have the ability and the people to do its work. It does. It needs better leadership from us as a board in order to do that.

    Chairman BACHUS. All right.

    Mr. LaTourette, do you have another follow-up?

    I have one more question. Ms. Bowné, in your opinion, do you think that the Chairman and the Executive Director have used regulatory action to control criticism of their actions?

    Ms. BOWNÉ. I have nothing that I can point to and say, that that happened, that I know for sure that they did. I have, over time, going back to particularly when this body looked at us before Mr. Swan's removal; and then at that time, we were very involved in a regulation called 704, which is the corporate reg.

    I heard numerous persons, CEOs, criticize the Chairman on things he had said or done, and I would say ''You're telling the wrong person, tell him.'' They would say, ''He'll get you.'' Or ''Karl Hoyle will get you, so you can't do that.'' Now I have nothing to tell that actually happened. But in this town, you know, perception is the problem. So if that perception is out there, people, perhaps without knowing at the agency level, were being controlled in their criticism, because they believed they would be damaged if they went forward.
 Page 81       PREV PAGE       TOP OF DOC

    Mr. KANJORSKI. Mr. Chairman, could I interject?

    Chairman BACHUS. Let me follow with one more. You've made efforts in the past, I understand, to have things printed in the NCUA newsletter, and the Chairman has opposed your efforts.

    Ms. BOWNÉ. It had to do with the GAO report, I think, that was the most recent example that I can think of—there are others. But when the GAO report came out, of course that was in response to being asked for by this subcommittee, I believe. I saw the first draft of the Chairman's article to go in the NCUA News, and his assessment of what the GAO report had said and what it did.

    I disagreed with some of those, but I didn't suggest that the Chairman not write his opinion. I wrote an article which presented my views. I was told that that could not go in, and indeed it did not.

    Chairman BACHUS. All right.

    Mr. LaTourette.
    Mr. Kanjorski.

    Mr. KANJORSKI. I notice there are only three board members here, and I thought I understood that the two board members, in the absence of the Chairman, who was overseas, were writing memoranda and discussing and making policy; is that correct?
 Page 82       PREV PAGE       TOP OF DOC

    Ms. BOWNÉ. Yes. And I believe earlier you mentioned all of us wanting to perhaps be the Chairman or whatever. And that was not—I would say to you, that was not the intent, certainly not my intent, nor do I believe it was Ms. Wheat's.

    Mr. KANJORSKI. It sometimes appears that way.

    Ms. BOWNÉ. We were on-site at a time that a serious report came to our attention.

    Mr. KANJORSKI. I understand. But again, I think I've indicated to you that I didn't see a life-and-death problem here. And it struck me just now, in thinking about it, we have two board members who were issuing memoranda to the staff without a formal meeting. I don't know how you got together to do that with the Sunshine Law.

    Ms. BOWNÉ. We were very careful not to do that.

    Mr. KANJORSKI. I don't know how you can violate the Sunshine Law and act outside of a regular meeting and put memoranda together to tell agency officials to do something that may be different than the normal policy previously enacted. I'm not condemning you for that. That's a judgment call you made.

    Ms. BOWNÉ. I understand that.

    Mr. KANJORSKI. I suggest, Mr. Chairman, that we have——
 Page 83       PREV PAGE       TOP OF DOC

    Ms. BOWNÉ. I would like to have an opportunity to answer that since it does get to the point of an accusation, I think.

    Mr. KANJORSKI. I don't believe it's an accusation. I'm not suggesting that. I'm suggesting—as Ms. Wheat said, some people have said in this town when two members get together and talk to each other and write memoranda that that may constitute a violation of an act. I don't know that. That's a sidelight issue.

    What I'm suggesting to the Chairman, as a result, so that we can have perhaps better cooperation between board members, we ought to consider increasing this board to five members so that the two can carry on discussions among themselves without violating the law.

    Chairman BACHUS. Would you like an opportunity to respond to what he said?

    Ms. BOWNÉ. Yes, I would. Again, in the context of where we were, and I understand, I heard you say that you don't see that we had a serious problem, we had to go forward.

    Mr. KANJORSKI. No, we had a serious problem, but we didn't have a life-and-death problem.

    Ms. BOWNÉ. Life-and-death?

 Page 84       PREV PAGE       TOP OF DOC
    Mr. KANJORSKI. Where constitutional rights, due process and all the other protections that are in place in the system——

    Chairman BACHUS. Mr. Kanjorski, I want her to respond.

    Ms. BOWNÉ. Life-and-death probably depends on where you are and what you're dealing with at the time.

    This report seemed extremely serious to me. The implications in it, the possibilities that we may have to separate employees, that was one of the things; also the timeframes we had to work within.

    The first timeframe we had to meet was 30 days. After that, we had some 90-day and 120-days. First of all, we talked to the Inspector General and learned that he had not had the report earlier and he had not seen the 1996 report. His opinion, to us, and he expressed it exactly that way, was, had the Special Counsel not chosen to go forward with this investigation, he would—but his advice was that, having read that report, having looked at it, that he thought that we should go forward to ask that the persons implicated in the report recuse themselves from further action with the OPM.

    My judgment was already the same, so I thought we should go forward.

    We did that. We met with the group that I mentioned earlier, we pulled together those who had budget responsibility, and asked them for budget figures. We asked them from what they saw, if we had to separate these examiners; what that would mean? We did that in what you might call an ''informal briefing'' of two board members at the same time. That is not an unusual thing to happen at our agency.
 Page 85       PREV PAGE       TOP OF DOC

    Chairman BACHUS. All right. Thank you.

    We've got about a minute left before we have to adjourn the hearing. I want to let Mr. LaTourette take that minute and that will be the final question.

    Mr. D'AMOURS. I was hoping I could say one thing, Mr. Chairman.

    Chairman BACHUS. Yes.

    Mr. D'AMOURS. On the safety and soundness question, to assure this subcommittee and the credit union community that there are no serious safety and soundness implications here. We are very confident that this board, now being united, whatever our disagreements as to procedure were in the past, we are now together.

    We can work this out with no safety and soundness implications and there will be budget implications for the agency, but even those will not be what you would call greatly serious implications.

    Chairman BACHUS. OK. Thank you, Mr. D'Amours.

    Mr. LATOURETTE. I don't think there will be time to answer this question, so if each of you will be kind enough to perhaps reply to it in writing to the subcommittee, and I'll appreciate it.

 Page 86       PREV PAGE       TOP OF DOC
    I have gone back to the premise of this hearing. I assume that none of the board members instructed the Executive Director to engage in a diversity program that would lead to the posting of obscure job sites or violate the scholarship program.

    I'm wondering, if the board did have a policy or instruction to the Executive Director or the Office of Human Services that directed them to engage in an agency-wide diversity program, what those instructions were, when they were given, and then what reports you received back as to the progress of the diversity program.

    And, just quickly yes or no, because I guess we're going, was there a board instruction for the Executive Director to engage in an agency diversity program, yes or no?

    Mr. D'AMOURS. Not that I'm aware of, sir. We could research that. I don't recall any board instruction.

    Mr. LATOURETTE. Good.

    Thank you very much, Mr. Chairman.

    Chairman BACHUS. We're adjourned. Thank you for your participation.

    [Whereupon, at 1:28 p.m., the hearing was adjourned.]