Six months after members of DFCU Financial Credit Union in Dearborn, Mich., effectively torpedoed the credit union's bid to switch to a mutual savings bank, the members are still trying to oust board members who supported the conversion.
But they are not alone in their fight. They have been helped by a little-known organization based in Raleigh called the National Center for Members Trust, which since May has quietly given them more than $25,000 to help pay for legal fees and a public relations campaign.
The nonprofit was established by three credit union executives in March 2006 to provide financial and legal support to groups that oppose conversions. So far it has funded only the Michigan group's efforts, but its organizers hope it will grow into a repository of funds and legal expertise able to support conversion opposition groups throughout the country.
"It's important for credit union boards to know that if they attempt to convert to a bank, the people that want to stop it will get some help," said Bucky Sebastian, the president and chief executive officer of the $2.1 billion-asset GTE Federal Credit Union in Tampa, and the center's spokesman.
Credit union-to-thrift conversions used to go off with few hitches, but they have become increasingly controversial in recent years. Opponents argue that members are often left in the dark about what a conversion would mean for them, and that directors and officers are motivated more by greed than by doing what is best for members.
Conversion opposition groups scored their first major victory in 2004, after the $726 million-asset Columbia Credit Union in Vancouver, Wash., announced its plans to convert. Though its members voted to approve the conversion, a group of its members, led by a political activist, challenged the vote and eventually forced Columbia to abandon its plans.
The $1.8 billion-asset DFCU scrapped its conversion plan in April in the face of challenges from a small but vocal group that called itself DFCU Owners United. DFCU would have been the largest credit union ever to switch to a thrift charter.
DFCU Owners United began a petition drive in April to force the credit union to call a special meeting to seek the removal of board members who refused to release the complete board minutes on the attempted conversion. When the petition drive - which collected more than three times the required signatures - failed to produce the meeting, credit union members began legal action.
The National Center for Members Trust's funding has gone for legal fees and an advertising campaign in support of DFCU Owners United, Mr. Sebastian said.
Mr. Sebastian's organization, which has no employees and no Web site, is funded through donations from credit unions, advocacy organizations, and private citizens.
David Adams, the president and CEO of the Michigan Credit Union League, said his group made a donation to the National Center for Members Trust in early 2006 through CUcorp, the league's for-profit subsidiary. He would not say how much it donated.
"It makes sense for there to be a third-party organization that can house these resources … so that each state association doesn't have to do it on its own," said Mr. Adams.
Mr. Sebastian said the idea for the National Center for Members Trust began to germinate last summer after Community Credit Union in Plano, Tex., and OmniAmerican Credit Union in Fort Worth announced plans to convert.
Those credit unions had the full support of a group called the Coalition for Credit Union Charter Options, an advocacy organization - partly funded by the banking industry - designed to ensure that credit unions retain the right to convert.
"All of the resources of the credit unions were available to those promoting the conversion, Mr. Sebastian said. "Those that opposed it … felt very strongly that their credit union should remain, but they got caught flat-footed." (Despite legal challenges, both credit unions have since completed their conversions.)
Mr. Sebastian established the organization in cooperation with Jim Blaine, the president of the $13.6 billion-asset State Employees' Credit Union in Raleigh, and Randy Chambers, the vice president and chief financial officer of the $238 million-asset Self-Help Credit Union in Durham, N.C.
But Alan Theriault, the president and CEO of CU Financial Services, a Portland, Maine, consulting firm that advises credit unions on converting to thrifts, called the National Center for Members Trust "a clandestine organization designed to do whatever is necessary to stop conversions."
"They're a negative force in the credit union industry," Mr. Theriault said. "I don't think that there is any credit union management team, or board of directors who would appreciate outsiders like these inserting themselves into the corporate governance of their institution."
Keith Leggett, senior economist at the American Bankers Association, agreed.
"On account of this funding, they are giving those that oppose the conversion a disproportionate voice in the process," he said.
Additionally, the National Center for Members Trust offers "a centralized process" for fighting conversions, Mr. Leggett said. "It isn't ad hoc" anymore. "You now have an architecture in place for opposing conversions."
Mr. Sebastian said the center has not provided any funding to members of Lafayette Federal Credit Union in Kensington, Md. Its conversion plan has been mired in controversy since Lafayette announced it in June.
"They have not asked for our help yet," Mr. Sebastian said. "If they need legal assistance, we will be glad to give them some."
