NCUA Gives Would-Be Convert 30 Days To Respond To Questions
Members of DFCU Financial Credit Union's supervisory committee have been given 30 days to answer specific questions stemming from a member complaint that they have compromised their integrity and have not been honest with members about the benefits they will receive should their CU convert to a bank.
That's the latest development in the conversion attempt by DFCU Financial, which has filed a lawsuit against the Michigan league alleging it is interfering in the conversion, which is now working to send ballots to members after NCUA rejected its initial ballots, and as a group of credit unions around the country donate money to a new fund aimed at raising member awareness of what they stand to lose in a charter conversion.
The order to the supervisory committee came from Mark Treichel, NCUA's Region 1 Director, in response to a five- page letter submitted via e-mail on Feb. 21 by Linda Malec, former DFCU Financial board chairman and spokesperson for DFCU Owners United, an anti-conversion group comprised of former board members, employees and members.
Malec told The Credit Union Journal that she received a copy of Treichel's response to her request that the NCUA "intervene to ensure that member rights are protected" on March 4.
In the letter written to Suzanne Smulsky, chairman of DFCU's supervisory committee, Treichel addressed everything from representation of insider benefits, reasons given to members about the proposed change, communications about a gag order, and the handling of a resolution passed during the CU's annual meeting to withdraw its application to convert to a mutual savings bank, Malec said.
Copies of Treichel's reply with Malec's original complaint were also sent to three supervisory committee members and to DFCU Financial's legal representative, Attorney Jim Fleischer, of Silver, Freedman & Taff, LLP.
"We want to ensure that this process is legal, fair and that members are provided accurate disclosures and have opportunities well in advance to make up their minds," Malec said after receiving Treichel's response.
While she said she was aware that the NCUA could not restrict DFCU Financial from moving forward with its plan, she hoped the agency would delay the voting process until it was clear that members received all the "underlying details about such a conversion."
Malec said she was pleased with the NCUA's timely response to her complaint letter, which addressed specific questions about the process and how it has been conveyed to members thus far.
In his correspondence to Smulsky, Treichel divided the complaints into five categories and provided specific questions for each. He asked that the responses be mailed directly to Malec within 30 days and copied to him.
Categories included: Integrity of the supervisory committee; representation about insider benefits; reasons given to members for the proposed mutual savings bank conversion; regulatory restrictions with regard to communications about the conversion, and resolution by members on the proposed conversion.
According to Malec, among the specific questions Treichel wants addressed are:
* Was the board's plan to fold the supervisory committee into the new board? Was that discussed with the supervisory committee? Were the monetary benefits ever discussed?
* What reasons have DFCU officials given to members about why they want to convert?
* Did the board and management convey to members and the media that regulatory restrictions kept them from discussing details of the conversion, as has been alleged by some members? If so, which regulations were they referring to? NCUA officials confirmed that there are no such restrictions.
* Was there a motion to withdraw the conversion application? Was it properly seconded, voted and approved and recorded into the minutes? Does DFCU plan to include information about this resolution with information it sends to members regarding the conversion?
Malec said DFCU Owners United has been extremely frustrated by the lack of response to numerous letters sent to DFCU Financial managers, board members and supervisory committee members seeking additional answers. The only response she has received came from a board member who did not attend the annual meeting.
"He said nothing about the most important topic of the credit union's history, only that he was disappointed with me for challenging his absence," Malec said.
"It is very offensive that the largest credit union in Michigan and one of the largest and healthiest credit unions in the country is spending huge amounts of members' money for a conversion without first seeking the endorsement of its members," she said. "This credit union didn't get to be the nearly $1.8-billion success it is today without the money, loyalty and support of its members. That, in itself, is reason enough for members to be well-informed about what they stand to lose if the conversion is successful."
She said the members of DFCU Owners United are "very committed" to the cause of saving their credit union and plan to launch a media campaign that will include lawn signs, bumper stickers and media advertising.
Although it was reported in The Credit Union Journal March 6, Malec said she has only heard through the grapevine of a newly formed national organization, National Center for Member Trust (see story, right).
Malec said one group that identified itself in an e-mail as the Coalition for Credit Union Conversion "purported to want to help us," but turned out to be "a bunch of bankers that wanted to tell us how wonderful it has been since their credit unions converted."