For Tom Dorety, president of Suncoast Schools FCU in Tampa, Fla., there would be plenty to gain personally were his own credit union to become Suncoast Bank.
During his testimony, Dorety said an independent analysis of such a charter conversion could raise as much as $850 million in stock, and that Dorety would recieve as much as $35 million over five years, depending on various factors.
Testifying on behalf of CUNA, he further told Congress the ability of management and boards to "game" such charter conversions for their own financial benefit is often emphasized by the consultants who have handled most of the recent credit union conversions.
"I am not implying that all these (recent) conversions have been motivated by hopes of private gain. But with less than 20% of credit union members actually participating in most...conversion votes, significant opportunity is created for insider directors and senior managers to enrich themselves in subsequent conversions at the expense of unwary or less informed members," Dorety said.
Among other testimony from Dorety, who said he strongly opposes the CU Charter Choice Act (H.R. 3206), which would strip NCUA of some of its authority over credit union conversions:
* Credit union boards that are considering conversions should make their decisions based solely on the best interests of their members.
* Directors and managers have a fiduciary responsibility to present objective and honest information to members regarding conversion proposals as well as other reasonable business alternatives.
* Full, plain language disclosures are essential to furthering the democratic process of deciding to approve or reject a conversion proposal.
* Since the net worth of the credit union belongs to the members, there should be no unjust enrichment to directors and senior management upon conversion of a credit union to a mutual thrift or any subsequent conversion to a stock institution; and,
* The NCUA and state regulators must make full use of their current authority to ensure that credit union members understand the conversion process and that fiduciary duties of credit union boards are fully enforced.
