Foiled 2003 Columbia CU Conversion Still Not Resolved
More than two years after Columbia CU reversed course and withdrew its application to convert to a mutual savings bank, dissident members are still struggling in the courts for a full accounting of that costly and bitter controversy.
A suit brought by Save Columbia CU, the ad hoc group that forced the withdrawal of the conversion and since has won control of the board, for a full financial accounting of the months-long controversy is still pending in the Washington Court of Appeals. The credit union confirmed last year it spent more than $1.5 million in legal and other fees in the failed attempt and in protecting directors from the ire of the members afterwards, which included a special recall narrowly survived by the board.
Narrow Margin Of Victory
Members of the then-$600-million credit union narrowly approved the conversion (52% of the vote) in November 2003, causing a member uprising that eventually forced the board to withdraw its application for a savings bank charter. The members then proceeded to force a special meeting to vote on the recall of all of the board members who voted in favor of the conversion, but the directors held on to their seats by a small number of votes. Since then, six of the eight directors who voted for the conversion have either retired or been voted off of the board.
At stake in the continuing suit are questions such as whether directors are bound legally by a credit union's bylaws, according to Douglas Schafer, the attorney for Save CCU. In a bizarre twist, the members of Save CCU elected to the board since then, and several members of the supervisory committee, have been barred from accessing the finances for the failed conversion because they are party to the ongoing suit.
Meantime, a new dispute has broken out over this year's board elections as the Save CCU group has splintered, even as it has won control of the credit union's board.
Three of the original members of the group who signed on as plaintiffs in the lawsuit-Steve Straub, John Cheek and Duane Bequette (now chairman of the board)-have disavowed the group as the group continues to pursue the original case over the conversion.
A New Dispute
And a new dispute has broken out over the election materials mailed by the credit union, which will no longer include a statement from the candidates that had allowed voting members in recent years to identify candidates as Save CCU advocates. This year's materials will only include factual biographical information.
At stake in the drawn-out lawsuit are five issues, according to Schafer. The first is whether the nine-year term limits (three consecutive terms) on the board that the panel approved as a bylaw amendment are binding, and to what extent. Up to five members of the Columbia CU board at the time of the conversion controversy exceeded the prescribed term limits. They argued that the limits were only effective from 1999, when they were adopted. The lower court, Clark County Court, agreed.
The second issue is whether volunteer credit union directors are fiduciaries and therefore, owe a fiduciary duty to the member/owners of the institution to comply with the bylaws of the credit union.
A third issue is whether, as the bylaws state, rank-and-file members should have access to credit union records, bylaws, bylaw amendments, minutes of board, meetings, except those documents that divulge personal or confidential information. The members group has been fighting for three years to gain access to the records but the board has continued to fight that effort and refused to share the records.
The fourth issue is: does Washington state law allow for a state-chartered credit union to convert to a state-chartered mutual savings bank. Save CCU maintains there is no express provision to do so. The credit union insists the state's parity provision allows the conversion, even though it is not specifically allowed under the state statute.
And the fifth issue is whether a credit union can opt for a simple majority vote on such a conversion, as allowed under federal statute, instead of the more stringent two-thirds vote required by state law.
"I eagerly await the (appeals) court's ruling and hope that it comes down on the position I have advocate," said Schafer. "And if it does, my hope is the majority of the board will acquiesce in its position and provide unfettered access to the documents."