DFCU Owners United Amassing Funds, Pressing for Information; CFA Critical of CU

DEARBORN, Mich. – While the $1.8 billion DFCU Financial FCU’s supervisory committee wends its way through its NCUA mandated investigation into how the CU has handled its bid to become a mutual bank, the DFCU Owners United group has continued to raise money and network with members to let them know what is going on with the CU. Earlier in March the group, which is made up of rank and file CU members as well as former CU officers and board members, sent the credit union a letter seeking more information about the conversion and was still awaiting a response. The group has also raised money from other Michigan credit unions which have chipped in to help it alert other credit union to what it says is the broader picture of the conversion question at DFCU. The $17 million Dearborn Village Community Credit Union has become the latest of at least 10 Michigan CUs to make a donation ($500), the group said, even though its geographic position meant that it might stand to benefit should DFCU become a bank. “People might argue that our credit union would stand to gain if DFCU’s conversion is successful,” said Terry Denmark, CEO of Dearborn Village, Michigan’s smallest community-based CU. “But, it’s not good for the long-term, because lots of credit union members and the credit union movement itself would lose.” “We greatly appreciate the support of DVCCU, other credit unions and individuals that have stepped to our aid,” said Linda Malec, spokesperson for DFCU Owners United and former board chairman of DFCU Financial. “DFCU Financial is already spending lots of members’ money on the conversion. They’ve hired a Washington, D.C. law firm and lobbyist to represent them, so it’s like David versus Goliath. We’re left to our own resources.” The group added that it has hired local legal counsel to support its efforts to get information about due diligence that the credit union board and senior management performed before making application for conversion to a mutual savings bank. Malec and Denmark both agree that the bottom line is “how will members benefit if the conversion is successful?” That was also one of the questions on the mind of Steven Brobeck, CEO of the Consumer Federation of America and which led him to write a letter to NCUA about what credit union members were not being told about the pending conversion. Brobeck wrote NCUA urging the agency to insist that the $1.8 billion DFCU Financial Federal Credit Union be more forthcoming with its members about both sides of the pending conversion question. In a Mar. 20, 2006 letter to the credit union regulator, CFA executive director Stephen Brobek cited a Credit Union Times editorial column highlighting the possible big money at stake for CU directors and management and said that the real issues are hidden by what the CU is being allowed not to say. “It is significant that nowhere on the credit union’s website is there any mention of the proposed conversion,” Brobeck wrote. “It is also noteworthy that, at the credit union’s annual meeting, according to press reports, members opposed to the conversion were prohibited from distributing materials. We very much fear that most DFCU Financial members will first learn of the proposal when they receive a complex, legalistic description together with biased recommendations from the board.” “This proposal and the way it is being advanced strongly smells of self-interest on the part of the institution’s top managers and board members,” he said, adding: “The reasons they advance for conversion have been effectively dismissed by the editor-in-chief of the independent Credit Union Times, who strongly suspects instead that the real motive is `big dollars for the board and management.’ ” Brobeck said his own personal research in the DFCU conversion proposal prompted him to write about this situation even though CFA has been concerned about the process behind credit union-to-bank conversions for some time. “ Frankly, I was appalled to go onto DFCU’s Web site and there was nothing on the site about the conversion proposal,” Brobeck said. “It really looks to us like the leadership of the credit union is trying to hijack this institution.” Brobeck emphasized that CFA doesn’t object to conversions where the credit union membership knows and understands the issues wrapped up in the conversion decision, but added that in these circumstances the organization is deeply concerned about the democratic process in making the decision. “It’s really inappropriate that this credit union is following the advice of consultants who specialize in getting credit unions to convert their charters,” Brobeck said, making the point that there are some aspects of a member-owned organization which do not belong to the leadership alone. “If this was a stock-owned bank or company it would be appropriate for the biggest shareholder to have his or her way in a decision like this, but this is a member-owned credit union where one-member-one-vote should be the standard.” -