"We don't know if this was security or what," Rodriquez said, adding that members found the men's behavior odd and perhaps a little sinister. "We're all credit union members," he said.

Rodriguez explained other organizations that also opposed the Technology Credit Union charter change proposal had offered to send people to support the effort, but the member group opposed to the charter change declined. "This is about our credit union, and we felt it best if only credit union members were here," he said.

Technology Credit Union has about 70,000 members and assets of  $1.6 billion. Credit union members began receiving their ballots to vote on the proposal last week. There is a special meeting scheduled for Sept. 12.

Meanwhile, more has come to light about how Technology Credit Union launched its charter change application.

California law and regulation allows for state-chartered credit unions to convert to federal credit union charters and vice versa, but the law is silent on the topic of state-chartered credit unions converting to mutual banks.

This regulatory gap is key since under NCUA regulations, one of the first things a state- chartered credit union seeking to convert to a mutual bank has to provide is a citation to state law or regulation that it has the authority under state law to make the conversion. Since there is no California law or regulation addressing credit union to mutual bank conversions, Technology needed to get an opinion in favor of the move from California's financial regulator, the Department of Financial Institutions.

The opinion came in a May 13, 2011, letter from Kenneth Sayre-Peterson, acting general counsel for the California Department of Financial Institutions to an unidentified correspondent who had written to lay out this line of reasoning on April 27, 2011, and request an opinion from the regulator.

The department has declined to identify the correspondent or offer additional comment about its opinion.

In his opinion, Sayre-Peterson accepted a line of reasoning that argued that because, under existing California law, a mutual bank could purchase a state-chartered credit union, state- chartered credit unions are therefore able to convert their charters to mutual bank charters.

"The California credit union law does not include an explicit provision authorizing such a conversion," Sayre-Peterson's unidentified correspondent wrote in the April 27 letter. "However, as explained below, it does include authority for a California credit union to engage in a purchase and assumption transaction with a federal mutual savings bank by which it would transfer all (or substantially all) of its assets and liabilities to the federal mutual savings bank (P&A). The federal mutual savings bank would assume the share accounts of the California credit union members and the loans made by the California credit union, as well as the other assets and liabilities of the credit union. The deposit accounts of the federal mutual savings bank would be insured by the FDIC. Upon consummation of the P&A, the former members of the credit union would have voting rights in the federal mutual savings bank. Thus, in the case of a P&A with a de novo shell federal mutual savings bank established to facilitate the transaction, the result would be functionally the same as if a direct conversion to a federal mutual savings bank had occurred."

In his letter, Sayre-Peterson wrote the department agreed with that reasoning. "It is our opinion that a California state-chartered credit union may convert to a federal mutual savings bank in the manner described in your letter, " he wrote.

Critics of the opinion generally declined to speak for the record, citing existing work for clients with business and regulatory ties to the state regulator. But, in general, they pointed out that the there were significant differences between the sorts of situations where a credit union or bank might enter into a purchase and assumption transaction, for example, when buying branches or when one financial institution is taking on the assets and liabilities of a failed financial institution.

One chief aspect missing from the opinion is any discussion of equity that, in a purchase and assumption transaction, would have to be accounted for but that is generally left unaddressed in a conversion, critics said.

Essentially, the critics noted, converting a credit union to a bank than merging it with another bank would be an easy way for the surviving bank to gain an enormously valuable asset without having to pay for it because it would have to do in a straight purchase transaction.

But one attorney, Richard Schaberg, a partner at the financial legal firm of Hogan Lovells LLP,  praised the opinion and said it reflected the reality found in California law. He held out reservations about the possible tax difference between a purchase and assumption transaction and a conversion but downplayed the question of equity, pointing out that in a purchase and assumption transaction steps to address equity could be included in the transaction without changing the nature of the transaction while, in a conversion, equity continues with the institution.