Remnants Of A Conversion Attempt
If anyone wants to see the wreckage of a failed credit union conversion they ought to come to this suburb of Portland.
That's where they'll find the once proud center of the local business community continuing to rebuild from a member revolt at Columbia Credit Union after its board if directors tried to convert the then-$620 million CU into a mutual savings bank.
The erstwhile savings bank-the members forced the board to scrap the 2003 conversion attempt-continues on strong financial footing, even while continuing to pay legal bills and other costs related to the failed conversion that are climbing towards $2 million.
Credit unions can watch a similar drama playing in Dearborn, Mich., where members of DFCU Financial were scheduled last week to face their directors in federal court over the failed attempt to convert that $1.8-billion CU to a savings bank (see story, above).
At Columbia CU, the members, who won a bitter contest for control of the credit union, continue to scrap among themselves while a court battle over that failed conversion continues to stretch through the state courts.
In the meantime, the board brought in as CEO former state credit union supervisor Parker Cann to stabilize the finances, after David Doss, the man who engineered the failed conversion, left to run Arizona State Savings & CU. Cann has kept the credit union in a strong position, even while the bickering on the board has persisted. Over the last 12 months, Columbia CU had strong loan growth of 8%, asset growth of 3% to $700 million, a return-on-average assets of 1.26%, all while maintaining a net worth of 10.6%, as of March 31, according to Callahan & Associates.
The internecine war peaked last week when three of the board members not currently up for re-election sued the rest of the board claiming they have been systematically denied access to important records and deliberations.
The three directors, members of the group Save Columbia CU, are all in a legal no-man's land, created by an unusual battle still going on in the state courts over the extraordinary defense the credit union put up when the members tried to recall the directors. Documents the credit union shared during its annual meeting two years ago show that the directors and management had paid out more than $1.5-million on expenses related to the failed conversion, including a high-priced Wall Street proxy firm to dissuade members from ousting the directors.
Also included is hundreds of thousands of dollars in legal bills paid by the credit union to the high-priced Portland firm of Miller Nash LLC-which are still accruing as the region's preeminent firm continues to defend the credit union in the courts.
Because that suit is still pending in the state appeals court, the three Save CCU members have been barred from reviewing the records related to the conversion. That includes local activist Lloyd Marbet, who was voted chairman of the supervisory committee after the failed conversion, but was still barred from reviewing key credit union documents.
The new suit was brought by Columbia CU director Cathryn Chudy, who had been engaged to marry Marbet, and Emmy Winterburn and Kathryn Edgecomb, all members of Save CCU.
Marbet, a well-known activist who began the unusual petition drive to recall the Columbia CU directors, is now running for one of three seats open in next month's elections on the nine-member board. Marbet is head of the Oregon Nature Conservancy, a not-for-profit organization he founded with a $1-million legal settlement. Marbet established membership in Columbia CU by making a $350,000 deposit on behalf of the organization.
Also running for one of the seats in next month's elections is Doug Shafer, the lawyer for Save CCU, who is still fighting the original conversion case in the state court of appeals.
The elections promise to provide a lot of fireworks before they culminate in the credit union's annual meeting on Aug. 29. The three board seats are being contested by 17 members. And there are seven candidates contesting three seats on the supervisory committee.