Community Members File Complaint Based on Charter Change Disclosures: Group Seeks to Re-start Voting Process
DALLAS - The Coalition for Member Trust, the organization of members of the $1.4 billion Community Credit Union opposing the CU's conversion to a mutual savings bank charter, has filed a complaint with the state's Credit Union Department alleging that the conversion violates the law in several aspects and the...
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DALLAS – The Coalition for Member Trust, the organization of members of the $1.4 billion Community Credit Union opposing the CU’s conversion to a mutual savings bank charter, has filed a complaint with the state’s Credit Union Department alleging that the conversion violates the law in several aspects and the CU’s board is violating its fiduciary duty. “We are concerned that credit union members are being asked to vote for something without having all the facts,” said Martin Sisk, a 39-year member of the credit union and a member of the Coalition. “Members may not understand that they are being asked to hand over ownership of their not-for-profit credit union to become just another customer of just another for-profit bank.” The complaint charges that Community did not provide adequate disclosures to its members because it took steps to disguise, diminish and disclaim disclosures required by the NCUA and violated Texas law in various other ways. The move would appear to pit the Texas Credit Union Department and Commission against the NCUA, since the complaint alleges that it is the community disclosures that the NCUA has approved which are deficient. But the complaint makes the point that NCUA never meant its disclosure regulations to restrict the authority of state regulators to act, noting: “NCUA has established that their regulations are a floor, and not a ceiling,” the group wrote. “If you as the Texas Credit Union Commissioner feel that insufficient disclosures have been made to safeguard and protect the rights of Credit Union members within your state, you have the right to take affirmative action, and demand disclosures above and beyond those required by NCUA.” But while Harold Feeney, the administrator of the Texas Credit Union Department, might have the right to examine the disclosures and require more information, it is unclear he necessarily has the authority under Texas law to do anything about it. Feeney said that the complaint has been passed to the general counsels who serve the Credit Union Department and the Credit Union Commission for their opinions on what can and cannot be done. The Texas Credit Union Commission sets policy for the Department which carries them out, Feeney said. The complaint’s questions, which deal with Community’s Disclosures, have been sent to the general counsel for the Credit Union Department and those dealing with access to the list of credit union members have been sent to the general counsel for the Commission, he explained. The complaint also pointed out that Community has placed the NCUA’s mandated disclosure statements on the back of a sheet which contained information meant to rebut the NCUA’s statements. Under case law relating to other sorts of consumer lending, putting disclosure statements on the reverse side of documents or under confusing cover letters has been held to make the disclosures invalid, the complaint added. The Coalition’s complaint took issue as well with the way the credit union is conducting the balloting, arguing that it is unfair and illegal for the credit union to forbid its members to change their votes before the final result is announced if they change their minds. “We find no legal authority for the decision to prohibit a member from changing his or her vote prior to the announcing of the final results,” the group wrote. “Since the NCUA and the Texas State Credit Union rules and regulations do not speak to the issue of whether a vote may be changed after it is cast, we must look to Texas common law. Under Texas law, a shareholder or member generally has the right to change his or her vote so long as the result has not been finally announced.” The group pointed out that case law involving public corporations allows stockholders to change their votes before the final results are announced and that the NCUA mandates that credit unions run their special meetings according to the Roberts Rules of Order or similar guides. Roberts Rules of Order also allow votes to be changed before the final result is announced. But Alan Theriault, consultant with CU Financial Services, a firm which is advising the $1.4 billion Community Credit Union and the $1.2 billion OmniAmerican Credit Union in their conversion attempts, observed that Community’s approach stems from the NCUA’s demand for a secret ballot. “When you vote absentee, you don’t get a second shot and you don’t get a second vote at the ballot box either,” Theriault observed. “When the ballots are secret, not even the independent firm can know how people voted or who voted.” NCUA put a requirement for secret ballots into its regulations after it refused to certify the Columbia Credit Union vote due to problems with ballot security. Essentially what the Coalition wants is for this vote to start again and for the process to include a way for both sides of the charter conversion question to have the room to present their arguments, explained Dominique Varner, a partner in the Houston law firm of Hughes, Watters Askanase, which is representing the Coalition. To that end, the Coalition has asked for the Department to enjoin the election and has asked for a decision by May 27. Given the scope of the group’s complaints, Feeney said the Department and Commission would do their best and might be able to act on different parts of the complaint without taking a position on every allegation. The credit union declined to answer calls requesting comment. -
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