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
th.
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."
© 2007, Used with permission from The Credit Union
Journal. All rights reserved.
