Conversion Voting Packets Mailed
Members of DFCU Financial began receiving packets from their credit union last week complete with a ballot to vote on a planned conversion to a mutual savings bank, disclosure information and opportunities to win big money prizes for themselves and a public school district of their choice.
The materials delivered in standard business-size envelopes were mailed out on March 23, according to Kim Ward Gabbert, Public Relations Director of the $1.8-billion DFCU Financial.
"It's simple ... just return your completed ballot in accordance with the instructions and automatically be entered to win one of 10 cash prizes up to $5,000," one flier stated. "The winners will also be entitled to designate the Michigan public school district of his or her choice to receive a cash donation from DFCU Financial in the amount equal to the prize won by the member."
The flier and other materials also stated that all voting members would be eligible for the prizes "regardless of whether they vote for or against the plan of conversion."
Also included in the packet was a notice that the new structure would include the eventual offer of stock under a mutual holding company organization.
"The charter change you are being asked to vote upon at this time does not involve a mutual holding company reorganization or stock offering of any kind," stated the proposal notice. It added that the prospectus will be made available at a later date and that a second special meeting would be held for a separate vote.
A separate letter signed by Harold Lowman, board chairman, and Mark Shobe, president, expressed concern about the CU's ability to meet future needs of the members "in the economically challenged and low-growth Metropolitan Detroit market," and promised that a charter change will not affect the way in which business is conducted or the experience members encounter at DFCU.
"It is only a change in our legal structure, which will allow us to raise capital, serve anyone in our market, and continue to provide the outstanding service that you expect and deserve," the credit union stated.
The information acknowledged that the change in structure would require the now tax-exempt CU to pay federal and other taxes, but said growth based on a three-year business plan will offset that cost. "The Charter Change should not have any taxable effect on our members under Michigan and other applicable law," it added.
The member letter was among several documents in the packet that urged votes in favor of the change, including a sentence in bold on the ballot that reads "Your Board of Directors recommends a vote FOR the Plan of Conversion."
This tactic irked at least one member who said he doesn't need CU officials to tell him how to vote.
"I have never heard of such a thing," said Eric Gubka, who added that his questions about the effect the conversion will have on his benefits have still not been answered. For example, he asked, "What will happen to the Co-Op Network and shared branching?"
Members can vote by mail ballot or at a special meeting to be held on June 21, 2006 at 7 p.m. at the Ritz-Carlton Hotel in Dearborn. Prepaid and pre-addressed return envelopes and instructions on how to sign the documents were enclosed for members who choose the latter.
Linda Malec and Margaret Blohm, spokespersons for a group that has organized to oppose the charter conversion that calls itself DFCU Owners United, said they could not comment on the ballot or disclosure materials.
Blohm said that the response to a website the group has created at www.savemycu.com has been positive and that other members have expressed their opposition to DFCU Financial's plan to convert to a bank.
She said some have said they are "appalled at the DFCU's recent advertising, which states that DFCU Financial is only "'changing the legal structure.' This is a total misrepresentation."
The ad Blohm was referring to appeared in a local paper and notified members that it had mailed "detailed information regarding a proposed change in legal structure that will better position us to serve members and the community for years to come."
The CU's ad also thanked members for placing their trust and loyalty in DFCU Financial and made no references to becoming a bank. It also did not include the NCUA logo, which some with the group are arguing is a violation of the law.
DFCU's ads came on the heels of ads placed in local newspapers by DFCU Owners United that urged members to "read all the disclosure information very carefully" before they vote, Blohm said.
They featured an open letter from Linda Malec, DFCU Owners United spokesperson and former volunteer chairman of DFCU's board of directors to "all member-owners of DFCU Financial."
The letter stated, in part, "I have joined with a group of concerned members...to urge our credit union's 160,000-plus members to become alerted to any benefits they would lose or gain if this conversion to a bank is successful."
Blohm said the group paid for both quarter- and full-page ads in local papers.
"We are continuing our efforts to spread the word and help members become informed before they vote," she said.
COVERSION COSTS AT $1.2 MILLION
DEARBORN, Mich.-In materials released to members, DFCU Financial CU listed the following as costs related to its attempted conversion to a mutual savings bank, costs that total $1.2 million:
Legal fees: $350,000
Consulting, Professional Fees: $147,000
Members Awareness Campaign: $115,000
Mailing Assembly: $73,000
Charitable Contributions, Cash Prizes: $60,000
Inspector of Elections: $50,000
Stationery Changes: $20,000
Processing Fees: $5,400
Special Meeting: $3,000