Two Lessons from the Telesis Community Credit Union Failure

by Anthony Demangone

NCUA’s Office of Inspector General recently published a Material Loss Review (, 32 pages) that serves as a postmortem on the failure of Telesis Community Credit Union.  You really should read MLRs. While you can learn from your own mistakes, I recommend learning from the mistakes of others.

Taking the report at face value, there are many lessons to be learned.  I’ll focus on two issues related to management and corporate governance.

1.  Corporate Governance Matters.  The NCUA OIG criticized Telesis’ management and board oversight.  This passage really caught my eye:

Based on our review of TCCU’s Board minutes, we concluded that managerial decisions were concentrated in two people, the CEO and the EVP, with very little depth or reliance on the skills of the rest of the Credit Union’s staff. The CEO appears to have had a persuasive and aggressive management style. The CEO was well known in the industry and viewed as strategically successful, particularly due to the historical success of BP. Thus, the Board tended to follow her recommendations with little discussion.

We found some of the minutes for both the Board and the Supervisory Committee were missing. Although the packets we did obtain contained voluminous reports, we found very little substantive discussion related to strategy, risk management, or related party activity. We were also unable to identify diligent follow-up on issues raised by examiners. We were told that the delivery of packets to Board members was so late that a thorough read and understanding of the details and trends was unlikely. (Emphasis added.)

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