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ARLINGTON, Va. – Executives with the Credit Union 24 Network and the Star network are preparing for a “prolonged” effort to convince CU24′s credit union shareholders to approve the network’s sale to Concord EFS, Star’s parent company. Star is a subsidiary of Concord. Concord and CU24 signed a letter of intent to go forward with the sale in mid-January. Two-thirds of the Network’s shareholding credit unions have to approve the deal before it can go forward. In the first full interview since the firms announced the sale, Network CEO Jim Park, along with Ron Congemi, President of the Star network, and Larry Scott, chairman of CU24′s Board of Directors, sought to explain more fully what they sought to do in their educational effort and clarify some of the questions and concerns that some credit union shareholders raised in the wake of the sale announcement. Scott is also President and CEO of the $524 million Campus USA Credit Union based in Tallahassee, Florida. The executives wanted credit unions to understand that credit union leagues that participate in CU24 do so owning one share apiece, just like the credit union shareholders do. Jim Park also made it clear that the Florida Credit Union League was not due to collect $3 million from the deal, placing the amount that CU24 owed the Florida league at roughly one-third that amount. Mark Starr, CEO of the $181 million Florida Credit Union, based in Gainesville, Florida, had suggested in a letter to other credit union shareholders in the Network that leagues might have more input into the sale decision since they might own more shares. Other individuals who claimed to be familiar with the Concord offer had suggested that the Florida league stood to collect the $3 million in money the Network owed the league. But the executives primarily wanted to reassure credit union shareholders that the series of meetings that are scheduled over the course of the next two weeks are only meant to begin the educational process, not complete it. The first meeting took place with Virginia CU24 shareholding credit unions on February 5 in Richmond. Both Park and CEOs who attended the meeting put the attendance at about 50, a number that Park said they anticipated and characterized as “excellent.” “We definitely want to give credit unions all the information they need to make an informed decision and to, in some cases, present it to the Boards of Directors. We expect that may take a bit longer than we expected,” Park said. Other means of communication will include mailings about the sale and further meetings, whether in groups or one-on-one, the executives said. Park acknowledged that the increased communication demands would mean that the vote on the sale might be as much as two months farther away than the firms had anticipated, putting it sometime in the second quarter of 2003. Some of the opposition that CU24 and Concord will have to overcome can be found among credit union CEOs who have questioned whether their institutions would benefit from giving up control over what had been a credit union-owned network. Starr has brought the topic up in two letters to other CU24 shareholding credit unions and suggested, in the most recent one, that the members should consider a merger with Concord, California, based CO-OP Network rather than the Concord purchase. “My research over the last few weeks has shown that we may have an exciting opportunity to preserve credit union control and achieve economies of scale by pursuing a merger with CO-OP Network,” Starr wrote in a letter dated February 3. He also wrote that 75 credit unions had contacted him about his first letter and that none had been in favor of the sale to Concord. Speaking for CO-OP Network, Network President Gene Polito denied emphatically that the Network had convinced Starr to make the suggestion or that it was interested at all in influencing the sale of CU24 to Concord. Polito added that the Network would answer questions about its services and products for any credit union, whether they were CU24 members or not, which approached it for information. Starr’s letter to the other credit unions had also included a letter he had sent to CU24, asking the organization for detailed documents about the sale and what led up to it. Park said he had seen a copy of the letter that had been faxed to him while he was traveling but that he had not had a chance to examine it in detail. In any case, he said, all the details about the sale would be included in the voting information that would have to be delivered to credit union shareholders prior to the vote. Roger Ball, CEO of the $207 million CALL Credit Union, based in Richmond, Virginia, had been one of the attendees at the Richmond meeting that agreed to speak for the record. He said that before the meeting he had not been convinced about whether the sale was or was not a good thing, and that he remained unconvinced after the meeting. “I guess what I found puzzling about the meeting was how little information we were given from the CU24 participants,” Ball said. “I left the meeting undoubtedly convinced that Concord is a great firm and that it is making lots of money for its shareholders,” Ball said. “But I was not any more convinced that this was a good thing for the Network to do at this time.” Ball said that the presentation of the reasoning behind the deal had relied a great deal on projections of growth and success in the network stretching out 10 years or more, but had seemed to assume static Network policies. “Well, of course if we don’t change anything between now and then we might have those outcomes,” Ball said, “but whose to say we can’t decide to change things along the way?” In the end, Ball noted, “I have to represent the interests of 25,000 credit unions members in this. I have to vote for them.” But the interests of its members is exactly why Pentagon Federal Credit Union will vote in favor of the sale, according to one of the executives. Pentagon Federal is both a shareholder of CU24 and a member of Concord’s Star Network. Pentagon Federal Senior Vice President James Schenk said that he had found the meeting “very informative” and that his institution would back the sale on behalf of its members. “We have been Concord customers and have been very impressed with their reach and the resources they bring to the table,” Schenk said. He noted that Concord was “very well capitalized” and that the firm planned to bring out a series of new products in the coming year that Pentagon thought its members could use. The Pentagon FCU’s evaluation echoed some of the benefits the executives said come along with being part of a for-profit firm. New products like account-to-account transfers and money transfers from ATM to ATM, much like Western Union wire transfers, were due to come out from Concord later this year, said Congemi. “Part of our evaluation of the offers took into account some of the increased products and services being part of this company could bring our member credit unions,” Scott said. “Products and services which might take us years to get on our own.” [email protected]

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