The embattled board of Columbia CU was preparing last week to put an end to its controversial efforts to convert to a mutual savings bank in light of growing opposition by members and regulators.
The board issued a statement last week saying it was "actively considering an option to table any revote on the conversion to a mutual bank in favor of working with the credit union industry to gain access to secondary capital." The statement itself was something of a surprise, because access to secondary capital has never been mentioned as a motive for the conversion.
The board's backtrack came just days after NCUA issued a final report indicating the credit union manipulated the controversial ballot last November to convert to an MSB, which won out by just 414 votes out of more than 9,200 cast. As a result, NCUA, which Columbia purposely chose as the chief arbiter of the vote, rejected the ballot.
The NCUA report, which concluded a comprehensive 10-week review, found widespread irregularities and illegalities, according to Melinda Love, director of the agency's west coast Region Six, who conducted the review. "I upheld my original decision and ordered a new vote be taken," said Love.
But the credit union board, facing mounting pressure by a member petition seeking to recall all nine members, appeared ready to retreat from the conversion as negotiations with state regulators failed to bear fruit last week.
Though the state's Department of Financial Institutions had validated the petition, signed by 3,600 members, credit union officials were steadfast in their opposition to holding a special meeting where directors would be exposed to an unprecedented recall.
The board was offering to postpone the regularly scheduled annual meeting from March 16 until April 26 and to allow the petitioners to field a slate of four candidates for the board vacancies. But the petitioners, calling themselves Save Columbia CU, said that offer was not adequate and nothing less than the special meeting called for in the petition would satisfy them. "The group doesn't feel that that's at all a consideration. The group isn't going to pull its petition," said Steve Straub, a spokesman for the petitioners and a former CEO at Columbia Credit Union.
NCUA found in its review that the mail ballot held last fall was carefully orchestrated to suppress certain votes and succeeded in eliminating thousands of eligible voters from participating. Among the findings were that 4,700 joint account holders who were eligible to vote did not receive ballots; that 2,183 ballots were mailed to incorrect addresses more than once, even though the addresses on many of the accounts were corrected; and 227 members in the process of being expelled from the credit union for causing a loss were denied ballots even though they were still eligible to vote.
In addition, NCUA said that it found that 23 people got ballots even before being qualified as members, including several members of Columbia President David Doss' family, and Hans Ganz, the CEO of credit union-convert Pacific Trust Bancorp (Formerly Pacific Trust FCU), setting those people up to get in on a potential stock offering after the conversion. NCUA also found that despite Doss's denials, he and other managers had discussed selling the institution to the public in a stock offering after the conversion to MSB. The NCUA report found it was Doss's "stated intention" to eventually sell the institution in an initial public offering, some of the proceeds of which would be used to acquire another bank in the area. The report did not establish whether the board knew of the plans to take the institution public.
Other Findings
NCUA also found the credit union had no third-party controls for counting the ballots and only hired an independent auditor to monitor the vote-counting after most of the ballots had been counted. In one instance, Paul Hodge, vice president of the credit union, brought more than 500 ballots into his office, closed the door, then counted them, according to NCUA.
The review also found widespread intimidation of employees, many of whom are also members, who said they felt pressured to vote for the conversion.
The federal regulator concluded that the special meeting Nov. 7 where the process was finalized was planned to attract the lowest possible participation by holding it at 10 am on a Monday morning, whereas, the credit union normally schedules its annual meeting at 6:30 pm to encourage a large member turn-out.
By late last week, the credit union was beating a retreat from the conversion plans. "The purpose of the conversion was to be able to maintain a community-centered, member-owned mutual savings bank and compete with the conglomerates that are moving into the fastest growing region in the state," said Robert Byrd, a member of the board. "We will continue working with the credit union industry and regulators to pursue regulatory relief that will help us achieve the same goals, while remaining a credit union."
