WASHINGTON - Some of the key players responsible for the growing conversions of credit unions to mutual savings banks denied last week that top managers and directors were motivated by greed.
Reporting of multi-million dollar windfalls by executives of credit union-converts are "greatly exaggerated by the press," insisted Alan Theriault, chief executive of CU Financial Services, the firm that engineered almost every one of the 39 conversions to date.
"The decision is made not to enrich managers and directors," Theriault said during a conference at conservative think tank American Enterprise Institute, "but because it makes good business sense."
Peter Duffy, an executive with Sandler, O'Neil, another consultant helping to convert credit unions, insisted he has never tried to convince a board by suggesting they could reap financial rewards. "I've never sold it on the money they can earn," said Duffy.
But Kirk Cuevas, partner in Dollar Associates, suggested the two consultants were being untruthful with their denials. "I actually think it is a component in the decision," said Cuevas, partner with former NCUA Chairman Dennis Dollar. "I think it's disingenuous to say otherwise."
Cuevas, whose firm conducts business with dozens of credit unions, said he knows of CEOs who have been solicited to convert to mutual savings banks by selling them on the idea they can profit handsomely. "I don't think it's fair to say that it is not a factor in the decision-making process." he said.
Duffy and Theriault said they are convinced that converting to a bank charter will make it easier for the credit union to grow and prosper, financially. Duffy told the group that the credit union model is under heavy pressure from the current economy, claiming that more than 4,200 CUs lost member this year.
Jerry Hawke, the former Comptroller of the Currency and now a banking attorney in Washington, said he was convinced that in making it increasingly difficult to convert charters, NCUA is violating the regulatory principal of 'free exit.' Hawke said it is enunciated in the Federal CU Act and means that financial institutions may convert to another charter without the approval of the regulator they are leaving (NCUA). "This prevents turf building and protection," said the former banking regulator.
Hawke said he believes NCUA has violated the principal of free exit by enacting new regulations on credit union conversions. "The inference is very, very strong that these rules are meant to deter conversions," he said.
NCUA Board member Rodney Hood, the final speaker, said he believes credit unions should have the right to change charters, as long as the members are fully apprised of the consequences when they vote on it.
But Hawke, who was a banking lawyer during the 1960s and 1970s when many mutual savings and loans converted to stock form, questioned whether the members of a credit union have any claim to ownership of the equity. "Are members owners?" said Hawke. "Who says so? just because they can vote?"
The hundreds of mutual conversions of S&Ls, said Hawke, put real doubt into the depositor's rights to ownership. "The concept of mutuality was somewhat of a fiction over the years. It's no coincidence that most mutuals converted to stock."
