Members Challenging Washington CU's Conversion to Bank
State and federal regulators are reviewing the Nov. 3 member vote to convert Columbia CU to a mutual savings bank after several members raised questions about potential irregularities in the vote, the closest yet for a credit union conversion to a bank charter.
The members are seeking the state Department of Financial Institutions to overturn the vote and order a new ballot. "We had a number of questions about the conversion, including the lack of information provided to members at the special meeting," said Lloyd Marbett, executive director of the Oregon Conservancy Foundation, representing both the Boring, Ore., organization and himself as members in calling for a new vote.
Among the questions Marbett and others raised at the Nov. 3 special meeting and which they say management refused to answer were what financial impact the conversion will have on the $600-million institution; why was the special meeting held on a Monday afternoon when fewer working members were able to attend; what kind of expanded services will be available to members as a bank; what tax liabilities will the converted institution accrue; what level of deposit insurance will depositors have under the new structure; and does management plan to take the institution public down the road, a path traveled recently by several other credit unions converts.
Marbett said several members during the contentious special meeting wondered how much in taxes the converted credit union would have to pay as a bank and what impact this will have on dividends; and what level of deposit insurance coverage they would have after the privately insured institution converts to federal insurance under the FDIC.
In addition, Marbett wondered why members' account numbers and names were attached to the secret ballots, potentially affecting employees' votes on the conversion.
Columbia CU officials did not return phone calls seeking comment.
Officials with the DFI and NCUA, both of which must certify the conversion vote, confirmed they are reviewing the election and the concerns raised by Marbett and several other members who have written them since the election. "We do have an ongoing investigation into member complaints and we are following up on some of them," said Scott Kinney, a spokesman for the DFI. He would not elaborate on the nature of the investigation.
But another dissident member who has asked the DFI to overturn the vote said one of the focuses of the probe is the voting majority requirement for approval of a conversion. Just 9,228 of the credit union's 59,000 members, less than 16% of membership, voted in the pivotal election, with 4,821, or 52%, voting for the conversion, and 4,407 voting against. With 414 votes separating the two sides, a mere 208 votes could have changed the outcome.
The close difference passes muster under NCUA rules, which require a bare majority of voting members to approve a conversion.
But under the state statute, which governs the activities of Columbia CU, a two-thirds majority is required to approve a conversion, meaning the vote will have failed.
Sources indicate that Columbia CU officials are invoking a so-called wildcard, or parity, provision in the state statute that allows state-chartered credit unions to operate under federal standards under certain conditions.
Neither Kinney at the DFI nor NCUA officials would say whether they will allow the conversion vote to go forward under the less stringent federal rules.
Marbett expressed dismay at the process, which he charged bypassed member input. "I thought that the credit union situation would be different, especially because the depositor has a vote in every decision that is held," he said. "We (the Oregon Conservancy) chose them because of the opportunity to participate."
While CCU officials planned to open as a new savings bank on Jan. 1, it is not clear if the review of the election and the certification of the vote will be completed by then. The DFI said there is no time frame for certifying the election result.