ALEXANDRIA Va. – A team from NCUA visited Columbia Community Credit Union the week of January 5 as part of the agency's ongoing investigation into whether the $600-million credit union properly handled its recent vote to change its charter. The agency acknowledged that the time required for the visit will likely mean it will not make its final decision on whether or not to ask the credit union to hold another ballot on the issue until sometime on the week of January 12, at the earliest. NCUA's Director of Public and Congressional Affairs, Cliff Northup, wouldn't say what the NCUA team hoped to accomplish in its visit, but Columbia CEO David Doss reported that he understood the NCUA staff would be recounting the ballots and otherwise looking into details of the voting. Although NCUA has already disapproved the vote pending the results of its investigation, the agency might still not ask for a new vote even if it disapproves the vote finally. Further, even if the agency should reverse itself and finally approve the vote and let the process go forward, the Banking Division of the Washington State Department of Financial Institutions would also have to approve and could ask for another vote to be taken. Staff from the Washington DFI was part of the initial investigation into the vote, but wrapped up their part of the investigation by late December, according to Linda Jekel, Director of DFI's Credit Union Division. Columbia's membership voted narrowly in the fall of 2003 to change the institution's charter from that of a state chartered credit union to a state chartered mutual bank. The 90-day balloting culminated in a contentious meeting on November 3 which some credit union members have alleged was mishandled. The charter-changing vote was extremely close. Out of almost 10,000 votes cast, the conversion passed by a very narrow margin of just 414 votes. Special Meeting Signatures Attained The closeness of the vote and what they allege were voting and disclosure deficiencies have led some Columbia members unhappy with the vote to hope for a chance to vote again. After organizing themselves into a group called Save Columbia Credit Union, the members reported on January 5 that they had collected more than the 2,000 signatures they need to require the credit union to hold a special meeting about the vote. The group has said they plan to collect additional signatures to make sure they have enough to call the special meeting. Save CCU has acknowledged that there is a time element to their effort since, theoretically, if the credit were approved to change its charter and ceased being a credit union before the meeting could take place, no number of signatures would be enough and the matter would likely be forced into court. Both sides have been hampered in their various efforts by bouts of unseasonable weather the area had been having. Doss said that the NCUA's staff visit to the credit union had been delayed because of the weather and Save CCU said that they would have had more signatures faster if the weather hadn't kept both Columbia members and signature gatherers home. The bad weather has also kept the group from meeting to evaluate the situation and plan their next steps, according to Save CCU organizer Cathryn Chudy. The group hopes to be able to meet on the evening of January 7. Doss said that he remained confident that the credit union's voting procedures and disclosures would be vindicated in the end and said that the credit union was trying to keep its focus during the interim. "Certainly I wish it had gone much smoother," Doss said, and added that the credit union was anxious to hear something definitive from the regulator. Doss also acknowledged that the controversy might have made just holding a second vote seem attractive, even with the additional expense, but he argued that keeping faith with the members who had voted for the conversion would prevent just opting for a second vote. "We have over 4,800 yes votes to consider," Doss added. "Those members voted already in favor of the conversion and their votes should count." Doss' sentiments regarding members who favored the conversion is born out by reading some of the statements from members who favored the conversion which Save CCU also included on its Web pages. "I have been a member of CCU for a long time," wrote David Smith, a Columbia member. "I am sorry to say folks this is just progress. CCU has been great as a credit union however; I understand that credit unions are becoming a thing of the past. The only way to become a force in the business lending (which makes the most money of all bank products or services) is to convert to a bank. Credit unions are limited on how much business lending they can do and CCU has hit the ceiling. Only way around it is to change charters." Smith added: "I will purchase the stock when it is offered and turn it quickly and make a lot more money than the deposit rates! I will miss the Credit Union, but if you take an objective look at it there is a lot of good things that will be coming from the conversion." Robert Freedman, a partner in Silver Freedman and Taft, the Washington D.C.-headquartered law firm which serves as legal advisor for many charter conversions and served Columbia, also defended the conversion disclosures and vote. "They have done everything according to the law and everything correctly as they were supposed to do," Freedman said. "I believe NCUA is going to validate their effort and approve the vote at the end of this ordeal." Freedman also argued that the credit union industry overall faced a greater risk in the way, in his view, NCUA had been accommodating the dissident credit union members. In as large a credit union as Columbia, he explained, the power of a few dissident members might not be much. But in a small credit union small groups of members could force mergers or even force the institutions to change their charters. He also argued that Columbia was such a singular situation that it would not mean anything for future credit unions which might be evaluating a charter change. But John Garabedian, a partner with the law firm of Jenkens and Gilchrist who has experience with helping credit unions through charter change and advocates some credit unions doing so, estimated that the Columbia situation would drive home to credit union boards that they are responsible in their disclosure statements for things they don't say as well as for things they do. "For example, in the case of a violation of U.S. regulations regarding a stock offering, it is not a defense that your stock offering disclosures were approved by the Security and Exchange Commission," he noted. The question of what a credit union's disclosure statements do not say, as well as what they do, is liable to be an increasingly important issue in the months ahead. Save CCU has pointed out, for example, that although Columbia's disclosure statement advised members that a charter change would allow the credit union to take advantage of "significantly greater flexibility by eliminating the field of membership requirements of a credit union," it failed to inform members that the credit union already had a field of membership that allows anyone living or working in the entire state and parts of Oregon to join. Save CCU also noted that the disclosure statement indicated that the credit union had already reached the 12.25% cap on business loans, but it did not disclose that it had already applied for and received an exception to this cap. John Annaloro, CEO of the Washington State Credit Union League, argued that the Columbia dispute could only strengthen credit unions in the end. "It may take time for regulators as well as the member-owners to sort out all of the points of procedure and law," Annaloro said. "I believe we should all help the institution by giving the parties appropriate time to do an excellent job. Member-ownership is a wonderful thing. It defines all credit unions in this nation. In an indirect way but important way, clarifying this process at Columbia benefits us all." [email protected]