TO: Allen Riley

former member of the Supervisory Committee

of Capital Corporate Federal Credit Union

The National Credit Union Administration Board ("NCUA Board"), as a result of its comprehensive investigation of claims on behalf of Capital Corporate Federal Credit Union ("CapCorp") , contends as follows:

You served as a member of the Supervisory Committee of CapCorp from 1991 through January 1995. In that capacity you were charged with carrying out the duties prescribed in 12 C.F.R. §701.12 (1994), which include determining "that management practices and procedures are sufficient to safeguard members' assets," determining "that the plans, policies and procedures established by the board of directors are being properly administered", and conducting "such other tests and reviews as may be necessary in the committee's judgment to meet its responsibilities." To discharge these obligations, the Supervisory Committee relied solely on the financial statement audit conducted annually by CapCorp's external auditors, on the auditor's management letters, and on NCUA examination reports. The Supervisory Committee took no independent action to conduct an internal audit to determine whether CapCorp was adhering to its own investment policies and to the requirements of the 1994 Standards & Guidelines of the Corporate Credit Union Network, which CapCorp had informally adopted. As a result, the NCUA Board concludes that the Supervisory Committee did not warn the CapCorp board of directors of the increased risks associated with CapCorp's investment activities in 1994.

By November 1994, CapCorp had incurred market value depreciation of approximately $100 million in its investment portfolio due to rising interest rates. NCUA concluded in January 1995, and still maintains, that such losses resulted from improper investment practices and activities by CapCorp, that the aforesaid losses posed a threat to the safety and soundness of CapCorp, and that CapCorp would not be able to meet the liquidity needs of its members.

For these reasons, among others, the NCUA Board placed CapCorp into conservatorship on January 31, 1995, and appointed itself conservator. Following $292 million in net withdrawals of regular shares and share certificates by CapCorp members (or 40% of total shares), and $249 million in borrowings (or 43%) to meet liquidity demand and liquidate maturing debt, the NCUA Board, acting in its capacity as conservator of CapCorp, liquidated nearly all of the CapCorp investment portfolio. On April 12, 1995, the NCUA Board, acting in its capacity as conservator of CapCorp, placed CapCorp into liquidation and appointed itself liquidating agent.

The NCUA Board, by reason of the aforesaid contentions, concludes that the members of the CapCorp Supervisory Committee, by their failure to conduct an audit of policies and procedures, share partial responsibility for the improper investment practices and activities that resulted in the market value depreciation of $100 million in CapCorp's investment portfolio.

Accordingly, the NCUA Board, in its capacity as regulator of federally-insured credit unions, hereby reminds you that it is incumbent upon each official of a federally-insured credit union to assume and fulfill his or her fiduciary responsibilities. Among these responsibilities is the duty to ensure that such credit union complies with the Federal Credit Union Act, 12 U.S.C. §1751 et seq., NCUA regulations, 12 C.F.R. §700 et seq., credit union by-laws and policies, adheres to prudent investment practices, and operates in a safe and sound manner. Your failure as an official of CapCorp to ensure that CapCorp complied with its own investment policies and adhered to prudent industry standards was a violation of 12 U.S.C. §1761d, and 12 C.F.R. §701.12 (1994).

This Letter of Reprimand is to be considered a formal supervisory warning. In the event you participate in future violations of the Federal Credit Union Act, NCUA regulations, credit union by-laws or policies as an official or other person participating in the conduct of the affairs of any federally-insured credit union, the NCUA Board is committed to exercising its authority to the full extent of the law to ensure that you comply and that you fully discharge your fiduciary responsibilities. Therefore, should you in the future breach your fiduciary duty to a federally-insured credit union, you will be subject to appropriately enhanced disciplinary action.

IN WITNESS WHEREOF, the NCUA Board, through its Secretary, hereby issues this Letter of Reprimand on this _____ day of December 1997.

NATIONAL CREDIT UNION

ADMINISTRATION BOARD

By:____________________________

BECKY BAKER

Secretary of the Board

I hereby certify that on this _____ day of December 1997, I caused one copy of the foregoing "Letter of Reprimand" addressed to Allen Riley to be served by hand upon:

Ronald R. Glancz, Esq.

Venable, Baetjer, Howard & Civiletti, LLP

1201 New York Avenue, Suite 1000

Washington, D.C. 20005-3917

_______________________________

Steven W. Widerman

Trial Attorney

Office of General Counsel