SALT LAKE CITY -- Roughly two weeks into its period of notification and balloting, the debate over whether the $186 million Beehive Credit Union will change its charter to that of a mutual bank has begun to heat up.
The credit union first disclosed to members at a meeting on March 3 that it was contemplating a move to a mutual savings bank, but the topic had not been frequently discussed until Beehive sent members its disclosure statements and other materials on Nov. 15. Despite the warning in March, several long-term members who agreed to speak only on background said that they were surprised by the CU's disclosure statement and that they had been under the impression that the CU would drop the matter after hearing from members that it was opposed.
Beehive's disclosure materials referenced the opinions of members and outlined the procedure from NCUA regulations that will allow members to communicate with other members about the proposed change. According to the CU's disclosure document, Beehive has 22,344 members eligible to vote on the charter change and, of those, 7,919 have provided e-mail addresses. Members who wish to send comments to those members must send them to the credit union no later than Dec. 20, 35 days from Nov. 15.
The long-term members who oppose the charter base their opposition, broadly, on three reasons. They distrust the motives of the CU's leadership, do not want to see their credit union change into a bank, and argue there is no compelling reason for the CU to make the change.
The members who agreed to speak with a reporter have been with the credit union for many years and expressed reluctance to come forward since, as one explained there are a lot of connections between different business associates and family members, some of whom either support the conversion or work at the CU.
"We are very interlinked community," explained one, "and nobody wants to say anything that is going to hurt anyone else's feelings or get anyone in trouble."
Nonetheless, members say they agreed with a letter sent on Oct. 8 by long-time CU members Teri Dial and Lori Christian to the Office of Thrift Supervision, the federal agency which oversees federally chartered mutual savings banks and which will be Beehive's new regulator should the conversion go forward. That letter argued that OTS should not grant Beehive's conversion request because the agency's mandate is to create new banks only where they are needed and the area does not need new banks. A lawyer for the CU countered in a Nov. 12 letter that the OTS has addressed similar questions in the past with the observation the CU's existence in its current location proves that it is serving a need.
Beehive's letter accompanying its member disclosure statement said that it had to convert to increase its service levels to members, remove the field of membership restrictions forced on the state chartered CU by Utah law, decrease the CU's dependence on non-interest income, and expand member business lending.
But members commenting on the disclosure package and the reasons Beehive gave for the proposed change argued that the service levels they enjoyed did not rely on new branches or new products. What matters, said one member, is that credit union staff knows the members and takes the time to meet their needs. That does not require additional resources, she added
Another directly challenged the suggestion that merely being a bank would necessarily keep Beehive from having to rely on non-interest income drawn from fees and service charges. The ten-year-plus member said she kept an eye on the banking market in her area for her business and she had noted that bank fees and service charges had been rising. Just being a bank was not going to remove that pressure, she remarked.
But much of the animus for the opposition to the conversion comes from a suspicion of the CU leadership's motives, particularly on the board. The focus of much of the suspicion is on former board chair now board member Douglas Foxley, a fixture on the Utah political scene, lobbyist for industrial loan corporations as well as other sorts of banks and payday lenders and, according to the members, the chief architect of the Beehive conversion effort.
None of the members accused Foxley of doing anything illegal, but several pointed out that the lobbyist has had a habit of benefiting monetarily and otherwise from coincidences in his business and political affairs.
A similar point was made by Salt Lake Tribune political columnist Paul Rolly when the CU announced its charter change move in March 2007. Rolly asserted that three of his board members were either current or former lobbying clients or allies in previous political campaigns and business deals.
Among them, he reported, is Jennifer Cannaday, an executive with Regence Blue Cross Blue Shield of Utah, a Foxley client; Brad Call, an executive with Maverick stores, another Foxely client; and Kirk Green, currently an executive with a digital graphics firm round out the list. Rolly reported that Green is a former official with the State Department of Economic Development who worked closely with Foxley in a gubernatorial campaign. The gubernatorial campaign, Rolly reported, gave Foxley the connections that he later used to make millions of dollars on a land deal.
The members pointed that these sorts of connections give Foxley a majority of votes on Beehive's seven member board and they contended that he has effectively stacked the board and planned this conversion primarily to benefit his bottom line.
Countering this view, however, Beehive has denied intending to issue any stock after the conversion and that any such conversion would require a second vote from members. Also, Foxley has been on the Beehive board since 1995 and would have had to be fairly prescient as well as patient to have planned Beehive's conversion from that point. Foxley had not responded to a request for an interview as of press time.
But one long-time member said she still doubted Foxely. "I hope that you will put this observation in the article," she said. "Converting this credit union would be a very good way to fund a retirement account, probably more than one," she said.