Members File Suit To Force Meeting

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In a lawsuit filed last week, two members of DFCU Financial have asked the court to force their credit union to hold a special meeting and board recall vote in accordance with its bylaws.

At issue is the credit union's attempt to convert to a bank charter, which has since been withdrawn, and a subsequent effort by a group that opposed the conversion and which gathered nearly triple the number of signatures required by the credit union's bylaws to hold a special meeting at which it planned to put a recall of the board to a vote. DFCU Financial has said it will not hold such a meeting.

In papers filed with U.S. District Court, Eastern District of Michigan on May 24, DFCU members Richard Sly of Northville Township, and Raymond Ward of Dearborn contend personal damage as a result of the CU's alleged breach of bylaws, misuse of CU funds and employees, and failure to provide members access to records related to a proposed conversion attempt.

Sly and Ward have asked for preliminary injunctions requiring the defendants to provide notice of and hold a special meeting for the purpose of a recall vote of all nine directors, make records relating to DFCU's proposed conversion available for inspection and copying, and prohibit DFCU from using CU money and employees to sway members to vote against the removal of one or more of its directors. Raymond & Prokop, P.C. is representing the plaintiffs.

Sly told The Credit Union Journal that he "didn't care to comment" on the pending lawsuit. Ward could not be reached by deadline.

Ward, however, is the man who offered his truck to DFCU Owners United to use as a moving billboard against the conversion. He has been active in the protests and petition drives outside the CU branches, but has asked that his number not be given to the media, Blohm said.

"I do know that he feels strongly about this issue and was investigating it separate from DFCU Owners United,'' Blohm said. At a press conference, Ward said that after he started asking questions about the conversion, DFCU Financial officials suggested he talk with an attorney.

"I don't believe they want this kind of attention and are filing the suit on behalf of all DFCU members," Blohm said. While DFCU Owners United, the group that initiated the recall drive, is backing the lawsuit, it has no direct involvement. Blohm added that she could not comment on behalf of the plaintiffs.

In a press release, DFCU Owners United said it fully supports the plaintiffs.

"Unfortunately, DFCU members have been put in the position where their only means to protect their rights is to go to court," said Gary Wolas, a DFCU Owners United spokesperson. "This lawsuit seeks to protect the rights of all members and is in the best interest of all members of DFCU Financial."

DFCU Owners United has not taken any apparent action against their CU for allegedly ignoring its own bylaws, but Blohm earlier told The CU Journal that the group was continuing to collect funding to support efforts to protect members.

DFCU Financial has spent tens of thousands of dollars in recent weeks to buy advertising, mail literature, develop a website and cater a special event in support of the embattled directors who angered members by their attempts to change the credit union into a bank. Employees also donned stickers urging support of the directors and were apparently told to encourage members to vote against recall efforts.

"DFCU owes obligations to its member, including plaintiffs, to use its funds only for DFCU business and to utilize its employees only for DFCU business," according to the suit. "The subject of the April 18, 2006 written request for a special meeting is personal to the directors. The special meeting to vote on the removal of the directors from the board is not DFCU business for which DFCU funds and employees may be utilized."

More than 1,760 members-including Sly and Ward-signed petitions asking for a special meeting where they plan to vote out all nine directors. The credit union has ignored their request, insisting three weeks ago that a recall would threaten the safety and soundness of the credit union, one of the most successful in the nation.

While DFCU Owners United continues to update its website, www.savemycu.com, with member comments and relevant news articles, DFCU Financial's website, www.savedfcu.com, created specifically to support its conversion attempt and board members, has been shut down.

"There are going to be questions and, as you know, DFCU hasn't been forthcoming with any information," said Blohm.

DFCU Financial did not respond to a CU Journal request for comment.

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