NCUA last week was considering initiating an administrative action to stop the Community Credit Union vote to convert to a mutual savings bank after the credit union giant defied the agency's directive to start the vote over.
The $1.4-billion credit union-the largest ever to seek conversion to a bank-remained defiant and insisted last week it planned to complete the ballot at a special membership meeting June 21, despite NCUA's warnings that the ballot was in violation of its newly passed rules on conversions.
In response, the federal regulator was reviewing a request by a group of Community CU members opposing the controversial charter switch, which was urging NCUA to initiate an administrative proceeding against Community CU for alleged violations of federal credit unions regulations, enacted just this past January, and to order a cease-and-desist order to halt the controversial membership vote in its tracks. "We're seeking an administrative hearing, at which time they can hear evidenciary material and render an opinion," said Dominique Varner, a Houston attorney who sent a seven-page letter to NCUA Region Four Director Jane Walters on behalf of the Texas Coalition for Member Trust, the group organized to oppose the landmark conversion.
An NCUA official confirmed last week the group's request is being reviewed by the agency's general counsel's office.
Members of the group expressed concern that if Community CU is allowed to complete the vote they could use any results, especially those showing clear member support for the conversion, in any re-vote in order to help convince a court or the public of broad support for the initiative.
The request to halt the landmark conversion vote came as representatives of Community CU continued to insist they plan to complete the ballot and hold the special meeting, despite the opposition from NCUA.
Proceeding As Planned
"We're going to hold the meeting. We've got tens of thousands of people interested. We owe it to our members and we're going to do it," said Robert Freedman, a Washington attorney representing Community CU.
Freedman, who has represented virtually every one of the more than 30 credit unions that have converted to mutual savings bank, said officials at OmniAmerican CU, another credit union giant in the process of converting, also plan to proceed with their balloting and special meeting, in defiance of NCUA.
Community CU, located in the Dallas suburb of Plano, is one of the biggest credit unions in the nation with $1.4 billion in member assets and an equal amount of members' investment funds under management-a total of approximately $3 billion. OmniAmerica CU, based in nearby Fort Worth, Texas, is a $1.2-billion credit union run by Larry Duckworth, a former prot?g? of Community CU's president and CEO, Gary Base.
NCUA has sent letters to both Community CU and OmniAmerica CU stating that member ballots/disclosures mailed to as many as 500,000 people are flawed and in violation of the agency's rules because a two-sides disclosures/rebuttal presents the credit unions' rebuttal to members first as they open the envelope. In letters sent to both credit unions, NCUA said the disclosures, all of which contain ballots, must be reprinted and mailed before a valid vote can be certified.
NCUA claims the disclosures are in violation of new agency rules, passed last year and enacted in January in response to growing concerns by the credit union movement that insiders are unduly being enriched by such conversions.
In their letter to NCUA, the Community CU opponents group outlines a number of allegations of violations of NCUA rules, including those related to disclosures. All of the allegations have been rejected by the Texas CU Department, which has given its approval to the Community CU balloting.
Among other things, the group wants a detailed accounting of exactly how insiders of the two credit unions will profit from any subsequent conversion from mutual to stock form, including management recognition stock grants, stock options, and employee stock ownership plans, which have made millionaires of other credit union insiders who have taken the conversion route.
