CU Bankruptcy Case Still Percolating; Former CDCU Members Trying to Fight Merger

DENVER – An attempt by some members to reorganize their credit union rather than see it merged into another continued last week as the members held a press conference August 9 to try to attract attention to their situation. The $2.4 million, 1,398-member Denver Community Development Credit Union merged with the $196 million Denver Community Federal on June 25. But the same day, members of the Bruce Randolph Merchants and Civic Association hauled it into court in an involuntary chapter 11 bankruptcy proceeding designed to let the credit union reorganize itself rather then disappear. Thomas Foster, a founding member of the credit union’s board of directors said that the association’s members, who founded the credit union, had taken the step after they came to believe nothing else could stop the merger. They had also decided David Paul, the Commissioner of the Division of Financial Services, had given up on working with the credit union to keep it independent. “In my opinion they just had their arms twisted,” Foster said, referring to the February 9 meeting at which the credit union board had acceded to Paul’s move to take over the credit union. “I don’t think they wanted to do it but they were just so tired of struggling about it.” Foster said the credit union later appealed the decision but the appeal was never heard because the group’s pro-bono lawyer had not been able to attend the appeal hearing due to a conflict with a high profile case. But Paul denied that he had lacked patience and stopped working with the struggling credit union. “No one was happy to see this happen,” Paul said, “I sure wasn’t because I chartered that credit union. But we had to act to protect the members.” He also pointed out that the credit union’s problems went deeper than merely the impact of a down economy. Denver Community Development had received secondary capital that it had lost, Paul asserted, and it wasn’t a likely candidate for a Foundation grant because of its ongoing difficulty. Paul challenged the assertion that the board had uniformly rethought its February 9 decision, pointing out that the only former board member that his office had heard from was Foster. “Whenever we have to do something like this, we understand that there are going to be people who don’t like it, but they have to understand that under PCA our hands are really tied,” he said, adding that no membership vote on the conversion had been held because the credit union had been under the Division’s control when the decision to merge had been made. “But the credit union board had understood that the Division was taking over the credit union with an eye toward finding a merger partner,” he added. Denver Community FCU was that merger partner and now finds itself somewhat unhappily inheriting turmoil that it had no part in creating. Branda Anderson, COO of Denver Community Federal, said that her credit union had begun to reach out to the former members of DCDCU with products they have not been able to have and with services as well. “If we have members who are upset or troubled, we definitely want to serve them if they will only let us do so,” she said. The credit union has recently added a message welcoming the DCDCU members to Denver Community. “In terms of demographics we believe we are very able to service those members,” Anderson added, “since we already service core Denver as part of our field of membership.” But Foster feared that Denver Community FCU would not have the same attitude of help and patience with the residents of his neighborhood and he feared particularly that the neighborhood will have lost something intangible in the merger. He pointed out that the Bruce Randolph Merchants and Civic Association was named after a local hero, a restaurateur whose career had been marked by feeding the homeless and other acts of good will towards the neighborhood. “That kind of loss can’t be made up by just another branch, even if they decide to put one in” he said. But Paul remained adamant in favor of the merger. “No one lost any money, the members now have access to services and products that they didn’t have before and what’s the use of a credit union that’s not viable in the long term,” he asked. Meanwhile, a judge will hear arguments on August 25 about whether the Denver CDCU can declare bankruptcy. Frank Kressman, staff attorney for the NCUA has said for the record that a credit union cannot declare bankruptcy or be declared bankrupt. A credit union can be put into conservatorship or it can be declared insolvent and liquidated, but it can’t be declared bankrupt in a court proceeding like an individual or corporation can, Kressman explained. -