'Advisor' Firm Is Source Of Letters
Some 200 credit unions have received letters-including checks and photocopies of an individual's Social Security Card-from an investment firm hoping to cash in if any of the CUs choose to convert to a bank charter in the future.
Pillar Capital Advisors sent the letters and checks under the name of one of its members hoping he could join the credit unions in the advent that any of them eventually convert to a mutual bank charter, thereby positioning that individual to participate in any initial public offering should the then-mutual bank later convert to a stock-based institution.
"We've done our homework. We even subscribe to your publication," a spokesperson for the firm-who asked not to be named-told The Credit Union Journal. "We have seen that there is a real opportunity here."
Pillar purchased a list from SNL Financial of credit unions with more than $50 million in assets on the theory that larger credit unions are more likely to convert, the firm said. But Pillar got more than it bargained for.
"I guess credit unions aren't used to this way of doing business," the Pillar spokesperson said. "Mutual banks get letters like this all the time. What we're doing is perfectly legal, and we didn't mean any harm. We weren't out to defraud anyone or scam anyone."
But the credit union movement is wary of such mass mailings seeking membership after similar mailings have been believed to have been attempts by bankers to "catch" credit unions overstepping their field of membership boundaries.
As a result, when word filtered through the movement that an individual was seeking to join about 200 different credit unions across the nation, credit union activists assumed this wasn't about one man's love of credit unions.
"CUNA sent out a warning about this letter several weeks ago, and we told our credit unions to be on the lookout for this," said the Florida Credit Union League's Mark Ivester, who initially tracked the letter down to Pillar Capital Advisors after several Florida CUs received it. "The initial assumption was that someone was testing FOM, and there was also the question of identity theft."
That's when Pillar started getting some interesting communiqu?s of its own.
"Apparently a bunch of credit unions called Citibank because they were suspicious of the checks, and Citibank put a hold on the account," Pillar said. "Then the U.S. Postal Inspector called us about suspected mail fraud. We did nothing wrong and didn't intend to scam anyone."
The majority of credit unions contacted didn't open an account, but a few did, the firm said. "But we didn't intend to actually join any of the credit unions right now," he added. "We were just compiling a list of credit unions we are eligible to join. Now credit unions think we are crooks."
When asked if the firm was at all concerned that the individual whose Social Security Card was photocopied with each of the letters might have his identity stolen if those letters had fallen into the wrong hands, Pillar's spokesperson said it was a calculated risk.
"Look, we do this all the time. We're not sending these to the general public, we are sending these to highly regulated financial institutions," he commented. "If a few of them get lost, that's a risk we're willing to take."
Pillar, which describes itself as "professional depositors," said it has been following the press coverage of credit union conversions, particularly that of Community CU, Plano, Texas, which the NCUA has refused to approve. "Right now, credit union conversions are small change. There have been so few of them," he said. "But, if you start to see five or six major credit unions convert each year, that's a different story. But with NCUA looking to block these things, we probably should just wait and see."