The following is an article reprinted with permission from the Fall 2005 edition of The WWR Letter:
Account Card Audit
By: Robert Rutkowski, Esquire
Perhaps you have been faced with a scenario like this one before. Lorna Loaded, a wealthy widow who is a well-loved member of your credit union, passes away after 95 years of health and happiness. Lorna always believed in saving money and had $100,000 in her share account and another $100,000 in an IRA. After a week or so, Stanley Spenthrift, Norbert Neerdowell and Ellie Executrix show up in your lobby and try to claim Lorna’s money. Stanley claims that the funds were in a trust and that he is the trustee. Norbert claims that he is Lorna’s sole beneficiary and that you should pay him immediately. Ellie claims Lorna’s estate is entitled to the funds.
“Not to worry”, you say, “We’ll just look at the account cards and distribute the funds according to what is written on the cards.” You pull Lorna’s file and you see that the card was last changed in 1984. Lorna’s eighth husband (now deceased) is listed as a co-owner. You figure the IRA is in better shape. You pull the card on the IRA (dated August 30, 1990) and you notice that it clearly indicates Norbert is the beneficiary. However, there is also a letter in the file written by Lorna, which is dated January 1, 2000, instructing the credit union to change the IRA beneficiary to the Werner Charity for Wayward Bunnies. Additionally, you find a trust agreement with a cover letter from Stanley (dated March 2005) along with a power of attorney from Lorna to Stanley, telling you to put all Lorna’s accounts into the attached trust.
You realize you have a problem. You turn to your policies and procedures for advice. They tell you that all account changes must be in writing and signed by the account owner. Moreover, each account change must be made on an official credit union account card for the change to be effective.
You look at the documents again. The account card from 1984 had a co-owner but he pre-deceased Lorna so he is out of the picture. Normally, then, Lorna’s estate would get the money on the share account. However, there is evidence that a trust was created and that there was some attempt to place the funds in the trust. If the credit union pays the estate, Stanley may sue the credit union, despite the credit union’s policy to require the changes be written on a credit union card, alleging that the intent was for the funds to go into the trust. If the credit union pays the trust, it faces litigation from the estate.
With respect to the IRA, Stanley might also want that money, but IRAs cannot be owned by trust accounts, only individuals. Norbert was the original beneficiary, but the Werner Charity might come forward and claim a right to the funds because of Lorna’s letter, despite no change being made to the account on the account card.
The lesson here is: audit your account cards. Pick a balance amount that you can tolerate to lose whether it is $5 or $20,000 and go through every account you have with a balance above this amount. Pretend as though the member has died. If you can readily determine whom to pay from the account documents, you are in good shape. If you cannot, call the member in and fix it. Had this account dating back more than 20 years been audited, Lorna could have been made to come in and sign documents that comported with the credit union’s policy. This situation is much easier to correct while the member is still alive rather then when his or her would-be heirs are standing in your lobby. Where there is money involved, there is always the chance for litigation, but if you have your documents in order, a favorable result is much more likely.
Robert Rutkowski is a Partner managing WWR’s Credit Union department and is located in the Brooklyn Heights operations center. He can be reached at (216) 739-5004 or rrutkowski@weltman.com.
Filed under: Current Issues in Credit Unions, PEBKAC, computers, credit unions, podcast
There is a term among those who do tech support for operator error. It’s called PEBKAC: Problem Exists Between Keyboard and Chair It’s the situation where you as the user have fouled things up and created your own problem or made your own problems worse. This happened to me quite dramatically yesterday.
If you are a reader of TCUB, then you probably know about Current Issues in Credit Unions (CIiCU). Last night, we recorded our one-year anniversary show. Afterwards, I saved the recording and walked into the other room. I noticed a lot of lights flashing on a network storage device that I use. I couldn’t figure out why that would be as only two computers were on, unless one of them had virus checking software that was scanning the network drives. I went back and checked and nothing seemed to be happening on either computer.
Now I’ve had problems with hackers in the past, so I jumped to the conclusion that I had an intruder. Being an old school sort, I acted in the most effective way possible to stop it: I unplugged the storage device. However, sometimes, it’s better to wait before you act.
Some of you have probably figured out where this is going. The computer that I used to record CIiCU was trying to save the show to the network device. When I clicked save, I neglected to check exactly where I was saving it. So by unplugging the network drives, I stopped the audio software in mid-save. The software then crashed when I tried to recover it: the show was gone.
We put a lot of time into CIiCU. Getting four lawyers from across the country together to spend an hour working on something is no mean feat. That hour of time was essentially unique. If something happens to the recording, there is no second take. My PEBKAC event wiped out the original. However, I have lived long enough to know that PEBKACs and other misfortunes happen. So I always record CIiCU with a backup. Indeed, if you download Episode 13 this month, you will be listening to the backup as the original is gone forever.
This experience got me thinking about human error and making decisions. So I put the question to you, dear blog reader. Have you had a PEBKAC event recently? Have you based a decision on a misconception or jumped to a conclusion and then acted on it? Have you tried to solve a problem you didn’t understand and then thereby create a larger problem? Have you ever pulled the plug too early on something? Have you had a situation where a back-up plan saved your bacon?
Last week, our firm exhibited our booth at the OCUS annual convention. The OCUS staff are masters of organization. The entire event went without a hitch. I thought I would share some pictures from the exhibition hall with you.
This is Jack Day, Al Reis and Dawn Pagon from WWR manning the booth:
Here’s John from Best Employees Federal Credit Union:
Here’s Dawn with Tam from St. Charles Borromeo Federal Credit Union:
Here is Debby from Brewster Federal Credit Union and Robin from Taleris Credit Union:
Mike from Associated School Employees Credit Union, and Paula and Jennifer from Sun Federal Credit Union enjoyed the convention:
And finally, Dawn and your humble blogger who can’t keep his eyes open for a picture:
Honestly, I don’t think people appreciate what the OCUS has to do to put on a show of this size. Getting the space together, assembling relevant and worthwhile educational sessions and coordinating vendors and sponsors is a huge production. Making registration work is, in and of itself, no small feat. This is not to mention booking the entertainment for two nights. The people that make up the OCUS managed all of this in such a way that felt seamless to me as a vendor participant. As far as I could see, there were no glitches; all the credit union people I talked to enjoyed themselves while getting real value from the education sessions.
The OCUS puts on, in my opinion, one of the best conventions in the country. I am very happy to have been a part of it.
Rob Rutkowski will be teaming up with CUNA and the Pennsylvania Credit Union Association (PCUA) next week to present a seminar on “Compliance Issues” and another on “Fraud Prevention” at the PCUA’s Teller/Frontline Bootcamp on April 24 in Mars, PA and April 25 in Harrisburg, PA. The Compliance Issues seminar will focus on gaining an understanding of the major regulations that affect frontline staff, understanding what you can and cannot say to members, learning the consequences of non-compliance and understanding the role one plays in a credit union’s compliance program. The Fraud Prevention seminar will examine the use of security features to detect altered and counterfeit items, understanding internal controls against embezzlement and dishonest activities, exploring how to protect members against fraud and learning about different types of scams and how to prevent them. If you’re in the Mars (near Pittsburgh, PA) or Harrisburg areas, you should consider joining us! For more information visit: http://www.pcua.coop/.
The following is an article reprinted with permission from the Spring 2006 edition of The WWR Letter:
Leisure Suits and Micro-Minis
By: Jennifer Monty, Esquire
Leisure suits and micro-mini skirts should no longer be gracing your closet, but they may be making an appearance in your workplace. If your workplace is thinking about creating or revising its dress code, some considerations must be made. While employers can define whether leisure suits or mini skirts are appropriate to wear to the office, a dress code must be carefully designed to avoid allegations of discrimination.
The standard for determining whether your dress code will create any legal challenges is whether your dress code is applied uniformly to all employees. The dress code must not violate any person’s civil rights, as protected under the law. A dress code cannot discriminate based on sex, religion or race. Typically, allegations regarding dress codes arise through discrimination lawsuits. For an employee to show a case of discrimination, the employee must show that:
(1) That he /she is a member of a protected group (gender, race, religion)
(2) That he/she was subject to an adverse employment decision
(3) That he/she was qualified for the position
(4) That he/she was treated differently from similarly situated members of the unprotected class
Kline v. TVA (6th Cir. 1997), 128 F. 3d 337, 349.
Once all four elements are proven, the burden shifts to the employer to articulate a legitimate, nondiscriminatory reason for taking the challenged action.
The goal is to avoid any of these discrimination suits, and the common areas where problems arise are detailed below.
Sexual Discrimination
While many dress codes will have different implications for men and women, the perfect dress code can be equally applied. A dress code should not differentiate or impose different standards on men or women. Although it may seem okay to require men and women to wear uniforms, this type of stipulation may be suspect. A dress code requirement or uniform cannot require that women only wear skirts or dresses. Dress codes cannot require that female workers wear uniforms, while male workers are permitted to wear business dress.
Other gender issues that tend to arise include lengths of hair that are applicable only to male employees. Courts have upheld a dress code that prohibited men from having long hair. Harper v. Blockbuster Entertainment Corp. (11th Cir. 1998), 139 F.3d 1385. However, an Ohio court in the 1970’s found that matters of personal grooming, if representative of a philosophy, idealism, or a point of view, are protected. Schneider v. Ohio Youth Comm. (1972), 31 Ohio App. 2d 225. The standard test that should be applied when considering whether your dress code sexually discriminates is whether it imposes a greater burden on either men or women.
Racial and Religious Discrimination
Employers must be careful that dress codes do not create any racial or religious discrimination. No-beard policies have been found to be both racially and religiously discriminating. Accommodations must be made within the dress code for religious appearance. However, if an employer can show a legitimate reason for the policy, such as a safety concern, it does not have to allow any exception to its policy. Some reports show that employees may claim that tattoos and body piercing are expressions of racial religious beliefs, however they have not been recognized as indications of racial or religious expressions. So long as any policy regarding tattoos or body piercings is applied equally to all employees, they should be upheld.
To ensure that your dress code is legal, consider the following points:
· Explain Your Reasoning: Your dress code must be based on your work environment and incorporate business-related reasons. Legitimate business reasons that affect dress codes include safety, maintaining public image, and promoting a productive and positive work environment. These reasons should be stated to all employees at the time of hiring so that the explanation will help to minimize any misunderstandings.
· Be Specific: Avoid using generic terms such as business casual or business dress. What is casual to one employee may be offensive to another. Specify exactly what types of clothing are appropriate and inappropriate and revise your dress code yearly to address any problems or new “trends” in your employees’ dress.
· Apply It Equally: Make sure that the dress code is applied equally to all similarly situated employees. Have a procedure for addressing dress code violations, and regularly enforce all violations.
· Accommodate: Make reasonable accommodations when appropriate. Specifically, be prepared to make accommodations based on religion and for employees with disabilities.
Designing a dress code can be as difficult as following the latest fashion trends. To avoid potential legal problems, be sure to consider any discrimination issues and apply your company’s dress code equally to all employees. Having an attorney review your company’s dress code may also be helpful.
Jennifer M. Monty is an associate in the Litigation & Defense department of the Cleveland office. She can reached at (216) 685-1136 or jmonty@weltman.com.
To read a more in-depth version of this article, which appeared in the Fall 2006 Employment Relations Law Journal, please click here: jnm-designing-a-dress-code.pdf
Filed under: mentoring
By: John B.C. Porter, Esquire
Credit unions are committed to giving back to the communities that they serve, as evidenced, for example, by the recent Ohio Credit Unions Marching Miles for Miracle Kids campaign. Much like the commitment credit unions have to community service, the Cleveland Bar Association (“CBA”) teamed-up with the Cleveland Municipal School District in a very unique way beginning in the Fall of 2006. Over 600 attorneys from the CBA, including myself, volunteered to go into 10th grade social science classrooms throughout the district in an attempt to better prepare these students for the social science portion of the new Ohio Graduation Test (“OGT”). All Ohio high school students must now pass this test in order to receive their diploma at the conclusion of their high school education. The name of the program developed by the CBA is “Rights, Responsibilities, and Realities” (“3Rs”). The intent of the program was for teams of four to six attorneys to spend approximately an hour and one-half with their assigned class five times a semester. A curriculum was developed and teaching materials prepared for each volunteer. The focus of each lesson was a different part of the United States Constitution, with a career-counseling portion at the end. The hope was by bringing attorneys into the classroom to discuss the Constitution in both a group and open-class environment, these students would gain a greater understanding of the Constitution and its ramifications. A corollary objective was to assist these students in developing better analytical skills as they applied what we discussed in class to the different fact patterns with which they were presented in the small group setting. The OGT is dense with essay questions and the students also needed help with better developing their ability to identify quickly and cogently the issue tested and then respond appropriately. The test was given in the middle of last month, so we have yet to learn whether our efforts will reap rewards for the students.
I was a member of one of two groups teamed up with Max S. Hayes High School, a vocational high school on Cleveland’s near West Side. It was a very interesting and challenging experience for me. I have not stepped foot in a high school since I graduated many years ago. I was lucky in that I graduated from an academically and financially enriched district. I was concerned as to how I would be received by students facing significantly different and more challenging life circumstances than I. The first classroom session was fairly nerve-wracking. The environment of this classroom, in an overburdened and under-funded school district, was quite different from my personal experience: One or two students appeared to be sleeping or not paying attention to what was happening in the classroom; some students were coming to class well after the bell rang; announcements interrupted us about two-thirds of our way through class. In all, things just seemed much more chaotic than I remember during my high school experience.
All of this, however, would probably lead you to believe that my experience was unrewarding or unpleasant. That couldn’t be farther from the truth. Most of the students were incredibly bright and interested in what we had to say. They were eager to volunteer to read the fact pattern for the day, give their opinion as to how the “case” should be decided, and chime-in on whether they agreed with the final outcome. These students had a very acute sense of what was just and what wasn’t—what activities should be protected by the government, and which activities fall outside of constitutional protection. I often felt compelled to push the envelope, take the students beyond what the fact pattern allowed, but then realized this was not the appropriate forum for me to proselytize by personal politics.
Again, we do not yet know if our efforts were sufficient to properly equip these students with the requisite tools to succeed on the OGT. I would like to think that we were effective in teaching these students something, but I know for a fact that they taught me many lessons. It is easy for us, from the outside, to look at a struggling school district like Cleveland’s and point to all of the negative things that contribute to its failure. Being in the thick of it, even as a visitor, however, from the dedicated teachers down to the students who hunger for knowledge and success, you see that the constituent parts of this district are no different from that of any other district. The biggest difference is that students from traditionally enriched school districts are expected and encouraged to succeed, but I fear this is not the same story for students who are the product of less enriched districts.
Filed under: credit unions
This Thursday and Friday (April 19-20), WWR will be attending the Ohio Credit Union System’s Zenith ’07 Convention at the Duke Energy Center in Cincinnati, OH. The convention is sure to be an exciting event, featuring 16 education sessions on the hottest credit union issues, keynote speakers Ben Stein and Bill Strickland, a chance to meet state and federal regulatory officials, plenty of networking opportunities, various social events and one of the country’s largest credit union expo halls. Be sure to stop by our booth (#242) to say hello!
For more information about the convention, please visit: http://www.ohiocul.org/Zenith07.htm
If you’re reading blogs, Flickr can’t be new to you. The Yahoo picture sharing service has been around for years now. What a perfect tool for credit unions to cover a grand opening of a new site or a charitable event that it is sponsoring?
I thought I would take a tour of how credit unions are currently using Flickr. A search on the site using the term “credit union” gleans 905 results. I note, though, that there is an arena called Saskatoon Credit Union Centre so there are a lot of pictures of rock stars.
I wanted to show you links to other interesting credit union pics. 
This comes up in the credit union search too. Mmm! Looks good Trey!
The following is an article reprinted with permission from the Winter 2007 edition of The WWR Letter:
Protecting Your Internet Presence: Defending Your Business From Internet Libel
By: Robert Rutkowski, Esquire
For some reason, people feel that they can express themselves more freely on the Internet than in traditional media. Perhaps it is a false sense of anonymity that emboldens people. In any event, it is very possible that people are being critical of or even libeling your business on the Internet without your knowledge. Do a Google search in the name of your company and follow it through a few pages. Do you see anyone ‘Google bombing’ you?
Google bombingis the practice of creating links on a blog or web page in such a way to get a particular search term associated with something. For example, if you Google “worst company in the world,” you get a list of companies for which people have expressed dislike. Ironically, as I write this, Google itself tops the list. You can create an RSS feed for this type of search in order to automatically update you when new search results appear concerning your company name.
It’s very easy for an individual to give a business bad press on the Internet. The question becomes: how do you deal with it? Some have suggested that you should first try to work it out with the person, especially if that person is a customer. This is fine, but in my opinion, if the customer or malfeasant is unwilling to cooperate, sterner measures need to be taken.
The first tool that merits consideration is the cease and desist letter. This can be very straightforward. You are merely telling the person that you are aware of their activity, that the information expressed is baseless and that if it is not taken down you will pursue legal remedies available to you.
If this doesn’t work, you can seek a temporary restraining order and then an injunction. If you have damages, you can sue for those as well. The problem with lawsuits is that you may not be able to locate the defendant. Sure, you can sue a “John Doe” like the Recording Industry Association of America does, but you really need to identify the person at some point.
If this information about your business violates Google’s rules, you may also be able to contact Google and get the information taken off of their search engine. This option is certainly far less expensive than litigation. Moreover, if your antagonist is outside of the United States, you may not have much legal recourse at all unless your company has the wherewithal to pursue him or her in another country.
Vigilance is your best defense against Internet libel. If you are aware of the problem, at least then you can take steps to stop it. If you can’t stop the perpetrator, at least you can stay on top of the problem and can fight the war of public opinion.
Robert Rutkowski is the Managing Partner of WWR’s Credit Union department. Located in the Brooklyn Heights operations center, he can be reached at (216) 739-5004 or rrutkowski@weltman.com.
Many people have expressed to me that one of the problems that credit unions face is that there aren’t that many new ones being formed. I think this is mostly because: 1) it’s not that simple and 2) there are many existing credit unions with fields of membership that overlap with people wanting to start new credit unions. I’ve had a couple of people approach me who initially said they wanted to start a credit union, but when I explained it to them, what they really wanted was a captive financial institution for their own business purposes. That’s not really the credit union model.
But if I could start from scratch and create a credit union myself, what would it look like? The other day, a co-worker said to me that she really liked her credit union, but that she wished that they had debit cards. This particular credit union picks and chooses what type of member services it buys into. They didn’t want the expense of supporting debit cards.
Recently, on my trip to Dayton, there were a number of credit union people who said that they don’t do cash transactions. These are small financial institutions that, by necessity, meticulously control costs.
A start-up credit union would really have to watch costs. One might wonder how a credit union can survive without being full service. It is possible. In fact, it is smart. A small credit union that tries to be all things to all people without matching growth with the expense is engaging in risky behavior. Also, the credit union must ask itself: what are the services that make the members put money into the credit union?
There’s frugality, however, and then there’s spending a little bit of money on technology to add services. A no-cash credit union, for example might do well to set up home banking. There are big players in the financial services world that don’t have branches at all. They use the Internet to offer other services and then piggyback onto banks and credit unions via ACH. When you want money out of an internet bank account at these no brick and mortar places, they just ACH it to your normal account. Some of them offer debit cards so you can use other financial institutions’ ATMs as well.
If I were starting a credit union today, I would think very seriously about the Internet bank model. I would not have any branches at all. I’d have debit cards and ATM network memberships for people to get cash in and out. I would use home banking and also ACH services to allow members to move money. Maybe I’d have shared branching for people who really need the brick and mortar (but that would be pretty harsh on the other credit unions because I’d have no branch to share).
Honestly, putting as many services as possible online and then ruthlessly cutting traditional real estate would be effective. That would be the mission statement of my new, web 2.0 credit union.
I ask you credit union folks and blogosphere junkies: if you were starting a credit union today, what would it look like?
