Prepared by E. Andrew Keeney, this presentation illustrates the potential liability to credit unions when faced with powers of attorney and subpoenas.

1. Powers of Attorney and Subpoenas –
The Risks, Abuses and Potential
Liabilities to Credit Unions
NAFCU
kau fC AN .com

2. E. Andrew Keeney, Esq.
Kaufman & Canoles, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
(757) 624-3153
eakeeney@kaufcan.com
kau fC AN .com

3. Demographics
• U.S. population over the age of 65 is expected to
double within the next few decades
• Some studies report that as many as 40% of the
individuals aged 85 and older will develop
Alzheimer’s
• With improvements in medical treatment, patients
often survive strokes, but not always with their
faculties intact
• A power of attorney provides a form of “insurance”
kau fC AN .com

4. What is a
Power of Attorney?
• A writing to an agent to “stand in the shoes” or to act
in the place of the principal for financial matters
• Not necessary to use the term power of attorney
• Typically see spouse to spouse, parent to child or
other family relationship
• Previously, powers of attorney became ineffective
upon principal’s incapacity or death
• Powers of attorney that survive principals’ incapacity
become known as durable powers of attorney
kau fC AN .com

5. Why Use a
Power of Attorney?
• Incapacity or disability
• Aging
• Illness
• Foreign travel (i.e. deployment)
kau fC AN .com

6. What Does a Credit Union Do
When Presented With a
Power of Attorney?
• Uniform Power of Attorney Act – credit union can
accept a power of attorney, in good faith, as long as
the credit union has:
– No knowledge that the power of attorney has been forged,
void, invalid and terminated; and
– No knowledge that agent’s authority is void, invalid or
terminated; and
– No knowledge that agent is exceeding the authority granted
in the power of attorney
• Practical considerations – credit union due diligence
is a good business practice
kau fC AN .com

7. Types of Durable
Power of Attorney
• A general durable power of attorney grants
the agent the authority to do virtually anything
• A special durable power of attorney limits the
authority of the agent to one or more specific
transactions
kau fC AN .com

8. How to Create a Durable
Power of Attorney
• Must be in writing
• Most states require language similar to: “This
power of attorney shall not be affected by
subsequent disability or incapacity of the
principal or lapse of time”
• There are exceptions – check your state law
kau fC AN .com

9. Does the Member Have the Legal
Capacity to Execute a Durable
Power of Attorney?
• Principal must have the capacity to delegate an act or
a transaction
• Many adults believe or have the legal presumption
that all adults are presumed to have legal capacity
• Definition of incapacity varies from state to state
• Potential questions to ask:
– Does the member know who his or her agent is?
– Does the member know the names of their family members?
– Does the member understand the consequences of his
actions?
kau fC AN .com

10. What If the Durable Power of
Attorney Appoints Co-Agents?
• Common practice since parents want to name
all their children as co-agents to avoid
showing favoritism
• Potential conflicts when co-agents act in
perhaps different directions
kau fC AN .com

11. Form and Execution
• Contains words to show the principal’s intent – no termination
upon disability
– Some states only require a signature
– Other states allow for an individual directed by the principal to sign
the principal’s name
– In some states, there is no requirement for a notary
• Presumption of genuineness if the signature is acknowledged
before a notary
– Some states require an agent execute an acknowledgement before
he will have authority to act under the durable power of attorney
– Some states require that the durable power of attorney be
witnessed or executed in the same manner as a will or deed
– Sometimes states prohibit the witnesses from being related
kau fC AN .com

12. Form and Execution (cont.)
• Execution requirements can cause problems
where the DPA is drafted and executed in
one state, but must be used in another state
• Safest approach is for the principal’s
signature to be witnessed by two unrelated
and disinterested witnesses and the
signatures of the principal and the witnesses
to be notarized with a seal attached
kau fC AN .com

13. Revocation or Termination
of an Agent’s Authority
• Inform the agent of revocation
• Destroy all the originals
• No legal or formal requirements
• How does a credit union protect itself?
– How about an affidavit or letter executed by the agent stating
the agent does not have actual knowledge of the termination
of his authority by revocation or the principal’s death?
• The trend in the law is to afford more protection for
financial institutions and other third parties
kau fC AN .com

14. What Are the Risks
for Credit Unions?
• Although increased acceptance of POAs by the public, an increased
risk of liability if a POA is not recognized by credit union. NEED A
VALID REASON
• Examples
– Fraud
– The agent’s authority has been revoked
– Agent is exceeding the authority granted to him
– Principal not a member
– Request for certification refused
• Standards to refuse include requirement for reasonableness, good
faith
• Internal procedures in place for reviewing and accepting DPAs
kau fC AN .com

15. Other Suggestions
to Minimize Risk
• Require the POA to be executed on a credit union
form
• Limit the types and amounts of transactions an agent
may engage in at the credit union
• Require additional information
– an affidavit that the POA or the agent’s authority has not
been revoked
– any doubt, the credit union may decide to refer the matter to
their legal counsel for review and comment
kau fC AN .com

16. Checklist for Review
• Does the POA comply with the POA legal execution
requirements (signature, witnesses, notary
acknowledgement)?
• If the POA must be recorded, does it comply with the
recording rules?
• Was the principal competent to sign the POA?
• Does the DPA comply with “durability requirements”?
• Is the DPA effective immediately?
• Is the principal alive?
kau fC AN .com

17. Checklist for Review (cont.)
• Whom did the POA name as the agent?
• Has the agent been identified?
• If a successor agent is acting, have the conditions to
the agent’s succession occurred?
• If there are multiple agents, must they act jointly, by
majority decision, or may they act independently of
each other?
• Has the POA been terminated or revoked?
• Does the POA contain a termination date?
kau fC AN .com

18. Checklist for Review (cont.)
• Would it be advisable to obtain an affidavit from the
agent?
• Does the POA expressly authorize the agent to do
what he seeks to do?
• Are there statutory requirements or restrictions on the
action the agent wishes to undertake?
• Does the POA set out any restrictions, limitations or
exclusions on the agent’s authority to act?
• Are there any unusual facts or matters present that
might indicate the POA should not be accepted?
kau fC AN .com

19. Effect of Death
• A durable power of attorney is automatically
invalidated by the death of the principal
• Exceptions:
• usually, if the agent does not have actual notice of the death
or revocation of the power of attorney
• good faith
• transaction in process
• Hold harmless and indemnification agreements by
credit union
kau fC AN .com

20. Subpoenas
The Risks, The Abuses,
The Potential Liabilities
to Credit Unions
kau fC AN .com

21. Subpoenas
• Types of subpoenas
• When and how must a credit union respond
to a subpoena
• Compliance issues
– State law
– Federal law
– Privacy concerns
• Reimbursement for costs and expenses
kau fC AN .com

22. • Subpoena is an order directed to the credit union or
their agent that requires attendance at a particular
time and place to testify as a witness
OR
• To bring with the credit union’s agent, books,
documents, records or other filings under their
control to produce as evidence
kau fC AN .com

23. Types of Subpoenas
• Most common – Subpoena duces tecum
– Request for production of documents, records and
other information
• Witness Subpoena
– Summons an individual to testify before a court or
a grand jury
• Garnishment Subpoena
– Either to enforce a garnishment order or to seek to
garnish money from a member’s account
kau fC AN .com

24. Types of Subpoenas (cont.)
• Subpoena from State’s law enforcement officer
– Criminal proceeding to determine if probable cause exists
• Subpoena from family law attorney
– Seeks documentation regarding adverse party’s financial
information and assets
• Subpoena pertaining to credit union litigation
– Discovery process in litigation
• Subpoena for attendance of a witness or custodian of
records
• Other – Department of Human Services
kau fC AN .com

25. Receipt of a Subpoena
• Issued by:
– Judge
– Clerk
– Magistrate
– State’s Attorney
– Attorney for a party
• Named Party, Individual or Custodian of
Records
kau fC AN .com

26. Receipt of a Subpoena (cont.)
• Service of a Subpoena/Service of Process
(often personal or physical delivery)
– Individual State laws describe service of process
and what a credit union can expect
– Federal Rules of Civil Procedure – Rule 45
• Service by any person 18 years or older and not a party
• Delivering a copy of the written document to named
person AND if attendance payment required for 1 day’s
attendance and mileage
kau fC AN .com

27. Receipt of a Subpoena (cont.)
– Who can be served:
• Credit union should establish procedures
• President/CEO vs. Receptionist
• BB&T Garnishment Example
• IRS Example
• Power of Attorney Litigation Example
• Bank of America Litigation Example
• If issuer of subpoena does not designate an
individual, credit union may select an agent to testify
on their behalf
kau fC AN .com

28. Response to a Subpoena
• If a subpoena from a government agency
• If a subpoena from a court in the state where the credit union is
headquartered
• If a subpoena from a court in a state where the credit union has
a branch
• If a subpoena from a court that is in a state where credit union
is neither headquartered nor has a branch
• Other
kau fC AN .com

29. Response to a Subpoena (cont.)
• If a subpoena from a government agency
– Federal Law
– Right to Financial Privacy
• Government may subpoena the disclosure of
financial records if
• legitimate law enforcement inquiry;
• copy of subpoena served on member on or before date
subpoena served on credit union; and
• 10 days expired from date of service or 14 days from date of
government’s mailing notice to member – no timely legal
objection by member
kau fC AN .com

30. Strict Compliance
by Credit Union
• Violation =
– Civil penalties equal to $100 plus actual damages
to member plus punitive damages if willful or
intentional breach plus costs of litigation and
reasonable attorneys’ fees
• Not a violation to prepare to comply and
assemble the records and be prepared to
deliver to Government
kau fC AN .com

31. Exceptions to Strict
Compliance by Credit Union
• Federal Grand Jury Subpoena
– Credit union prohibited from notifying any person
named in grand jury subpoena
– Potential penalties
• Loss of NCUA insurance
• Civil penalties from $5,000 to $1,000,000
• USE EXTREME CAUTION
kau fC AN .com

32. Gramm Leach Bliley
• Annual Credit Union Privacy Notice explains
information collected by member and ways in
which credit union shares information
• Does NOT apply to disclosure made to
comply with properly authorized
investigations or subpoenas
kau fC AN .com

33. State Laws Vary
• Credit union headquartered in Virginia receiving subpoena
issued by a Virginia court – must respond and comply
– Conducting business in state
– Subjects itself to personal jurisdiction
• Credit union headquartered in Virginia receiving a subpoena
issued by a Virginia licensed attorney (officer of court) – must
respond and comply
• Credit union headquartered in Virginia receiving subpoena
issued by a Florida court – need not comply
– Letter to issuer of subpoena (DOCUMENTATION)
– Comply due to reciprocity laws or savings in time and expense
kau fC AN .com

34. How to Determine State Law
• Consult an attorney
• Google
– Example: Virginia Code of Laws
– Example: Virginia Rules of Supreme Court
• State statutes and rules detail procedural aspects of
issuing, receiving and answering subpoenas
kau fC AN .com

35. Examples of Safeguards
• Virginia permits right to object to the subpoena if the issuer
gave less than 14 days to respond
• Oregon provides that a financial institution shall not disclose
the financial records of a customer, in response to a subpoena,
for 10 days after service
• Oregon provides that if a customer challenges the subpoena
(moves to quash) within the 10-day period, no need to comply
with subpoena unless customer consent or court order
• Check with counsel for credit union
kau fC AN .com

36. Reimbursement
• Generally, credit union can charge issuer of a
subpoena for costs associated with preparing and
copying documents
• Costs of compliance
– Lost personnel time
– Document copying expenses
– Electronic discovery costs
– Attorney fees
• Witness fees
kau fC AN .com

37. Reimbursement (cont.)
• Mileage
• Re: subpoenas issued by U.S. government
authorities
– Photocopy - 25¢ per page
– Staff time for processing - $22 per hour
• Others – reasonable costs to be reimbursed
• Witness subpoena
kau fC AN .com

38. Reimbursement (cont.)
• Federal case – fee must accompany
subpoena
– Witness fee/appearance fee - $40 per day
– Mileage – 48.5¢ per mile from place of business
to court
– Recovery of reasonable copying costs
• Non-federal cases – check state law
kau fC AN .com

39. Reimbursement (cont.)
• New Jersey provides banks (?) not a party to lawsuit
to recover, in advance, costs of complying with a
subpoena
– Search and processing costs
– Transportation costs
– Reproduction costs
• Credit union should contact issuer of the subpoena
and ask for reimbursement – up front
kau fC AN .com

40. Conclusion
• Risks and liabilities for non-compliance
• Observe federal law and state law
• Establish detailed policy and procedures
• Go slow
kau fC AN .com

41. E. Andrew Keeney, Esq.
Kaufman & Canoles, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
(757) 624-3153
eakeeney@kaufcan.com
kau fC AN .com

42. Powers of Attorney and Subpoenas –
The Risks, Abuses and Potential
Liabilities to Credit Unions
NAFCU
kau fC AN .com