'Dissidents' Win Control Of Board, But Elements Of The Fight Continue

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Two years after a failed attempt to convert Columbia CU to a mutual savings bank the group of dissident members who helped foil the controversial charter switch has won control of the $700-million credit union.

The self-styled Save Columbia CU, which engineered the defeat of the conversion attempt, won three more seats on the credit union's board earlier this summer, giving it seven of the nine directors' seats; and two more on the supervisory committee, giving it all five places on the critical panel overseeing the board.

But the rare show of member democracy represented by the unprecedented revolt over the failed conversion has yet to end the controversy at the largest credit union in Clark County. That's because the credit union is still fighting a lawsuit brought by Save Columbia CU that helped force the old board to withdraw the conversion initiative. And now that Save Columbia CU controls the credit union, that means the credit union is fighting itself in court.

Several original members of the dissident group want to see the suit go away, now that they have obtained their main objectives: defeat of the conversion; and the ouster of the directors who sought the charter switch.

"Our main focus going forward is serving our membership and serving it well. (But) until we resolve the lawsuit we can't put everything (in the past) to bed," said Duane Bequette, new chairman of the board and one of the original members of Save Columbia CU.

Getting Back To Business

"We've had a couple of years, two to three years, when a lot of focus has been put on other things, rather than the business at hand. My focus is to get the credit union back to the business at hand, serving the members," said Bequette, who served previously as director at Kohler CU, Kohler, Wis.

But in a strange twist, the newly elected members of the dissident group can't get the lawsuit dismissed because some members of Save Columbia CU want to see it through.

Even stranger still, Columbia CU is now paying the growing legal bills for both sides in the suit. That's because the Clark County Court ordered the credit union to pay legal fees for the members' group in its earlier ruling. So far, legal fees accrued by Save Columbia CU have been modest; less than $50,000. But legal fees for the credit union, which has hired powerful Portland-based Miller, Nash LLP at $350 an hour, have skyrocketed. Total legal fees related to the failed conversion and its aftermath, most of which has gone to Miller, Nash, has already exceeded $400,000, according to the credit union.

At stake, according to Douglas Schafer, attorney for Save Columbia CU, are several legal principles, especially pertaining to credit unions. Among them are ones that were at the heart and soul of the conversion fight.

For example, the group is trying to establish which credit union documents, including board minutes and billings, should be readily available to members and by what method.

Also at issue is when the board can use credit union resources to pay for electioneering, special meetings, legal defense or other expenses, as well as exactly how the credit union's term limits bylaw should be applied? If the court rules the term limits bylaw should be strictly adhered to, it could disqualify the only two surviving members of the pre-conversion board.

"It's important for this credit union, it's important for all credit unions," said Schafer. "I consider it important and my client considers it important."

"There is no clarity as to what the law is. There has to be some clarity as to what the law is," he added.

Steve Straub, a former CEO of Columbia CU who helped lead the dissident group, was elected to the board last year and now serves as vice chairman. Straub said the board is looking at addressing some of the same issues raised in the lawsuit, which he wants to go away.

"Other than the fight over the lawsuit," he said, "there wouldn't be anything in the way of moving forward."

Challenge Over The Voting

The battle over the conversion began in the fall of 2003. By a narrow 52%-to-48% margin, members of Columbia Credit Union approved the conversion to mutual savings bank in October 2003. But a group of members, angered over the process and the flight from credit union charter, launched a challenge by petitioning NCUA on alleged irregularities.

NCUA after reviewing the vote, found irregularities and an attempt to manipulate the ballot by management, and refused to certify the vote.

Then the dissident members launched an unprecedented effort to recall all of the directors who voted for the conversion, culminating in a heated special meeting where the directors just barely defeated the recall effort. Meantime, the directors agreed to abandon their efforts to convert the credit union.

By then, the dissident members agreed to clean out the old guard controlling the board-several of whom had served for decades without ever facing reelection. More than half of the directors had served longer than the board's own three-term (nine-year) term limit.

In the first elections after the special meeting, dissident members won four of the nine board seats and three of the five seats on the supervisory committee.

In June the group completed its takeover of the board, winning an additional three seats on the board and the final two seats on the supervisory committee.

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