NCUA Questions Voting Eligibility In Conversion
Against all odds, OmniAmerican CU submitted its bid to NCUA last week to convert to a mutual savings bank, asking the federal regulator to certify the controversial member ballot, despite the agency's vow not to approve the vote.
NCUA had already indicated it will deny the disputed member ballot because of the way the disclosures were folded, but now the agency has raised a new issue, questioning whether ballots the $1.2-billion Forth Worth credit union mailed to 99,000 members over a 90-day period reflected the true number of eligible credit union voters.
In a June 25 letter to OmniAmerican CU NCUA Region V Director Jane Walters, already under fire for her rejection of the member vote at nearby Community CU, asked why only 99,000 members were deemed eligible to vote on the conversion when the credit union's latest call report indicates it has more than 251,000 members.
During a special membership meeting on July 10, OmniAmerican said an overwhelming 76% of the 21,700 who voted approved the conversion. The 21,700 voting members represents less than 23% of the 99,000 members the credit union deemed eligible to vote on the conversion.
But Walters also continued to question the credit union's motives in the disputed mail ballots, which has prompted NCUA to call for a re-vote at both Texas credit union giants on the conversions.
The NCUA administrator asked OmniAmerican CU for any written instructions it might have provided to Tri State Financial Press, LLP, regarding how the printer was supposed to build and mail the disputed ballots. NCUA believes representatives of the two CUs, which used the same company to print and mail ballots, intentionally had the ballots mailed so that members read the credit union's rebuttals to NCUA's required "boxed disclosures" explaining the ramifications of the switch to bank to voting members, before they read the boxed disclosures. "In the unusual event that there were no written instructions, please provide detailed information about any oral instructions provided in that regard," Walters told the CU representatives.
The letter was sent to OmniAmerican CU's Washington, D.C., attorney Robert Freedman, of Silver, Freedman & Taff; the CU's CEO Larry Duckworth and its chairman, Clyde Johnson; as well as Harold Feeney, director of the Texas CU Department.
Representatives of the two CUs deny the presentation of the rebuttals before the required disclosures represented an effort to deceive voters.
The way the ballots were presented to voters is at the heart of NCUA's rejection of last month's conversion vote at Community CU-the largest credit union to seek a bank charter-and is the basis for a lawsuit by the $1.4-billion Plano, Texas credit union challenging NCUA's action. A hearing on the suit is scheduled for Aug. 15.
OmniAmerican said last week it has joined the Community CU suit as an intervenor. "NCUA has ignored its own regulations in refusing to approve the vote," OACU said. "NCUA quibbled over the way a piece of paper was folded and even questioned matters already approved by the Texas Credit Union Department."
NCUA's actions in the conversion cases is under increased pressure from members of Congress, where a small group introduced legislation to roll-back NCUA's powers over CU conversions to banks.