DALLAS – The ongoing conflict between NCUA and two Dallas areacredit unions which are seeking to convert their charters to thoseof mutual banks remained tense last week over balloting issues. TheNCUA both confirmed that it had invalidated the balloting in the$1.1 billion OmniAmerican Credit Union's charter change effort(something it already did with Community CU) and that it would notchange its decision based on anything either credit union might doto remedy the situation short of starting the disclosure and votingprocess again. On May 13, the agency sent a letter to the $1.4billion Community Credit Union advising it that the first two ofits disclosure packages violated its regulations because thedisclosure language mandated by the agency was on the wrong side ofthe page which also contained a rebuttal statement from the creditunion. NCUA has also confirmed that it sent a similar letter toOmniAmerican. There had been a question of whether NCUA would actin the same way towards OmniAmerican because that credit union'sdisclosure packages might have appeared to have been in conformancewith what the credit unions agreed to do. No OmniAmericanexecutives have returned calls about the situation, though oneexecutive quoted in the local press confirmed that the credit unionhad received a letter and maintained, as Community executives have,that the credit union lived up to its agreement with the agency.Executives from both credit unions have said that the institutionswould seek to “work with” the NCUA to resolve the dispute, whichthey have generally downplayed as “a folding problem.” Part of thateffort appears to have been changing the disclosures in the thirdmailing so that they matched what NCUA said it wanted from thebeginning from all three required mailings. Credit unions seekingto change their charters to those of mutual banks must set a datefor a special meeting for members to consider and vote on the moveand must mail a package of disclosures to their members about thepotential change 90, 60 and 30 days out from the meeting.Community's meeting is scheduled for June 21 and OmniAmerican's forJuly 11. NCUA spokesman Nick Owens said that a change in the thirdmailing would not make the agency reconsider its judgment that thecredit unions' disclosures violated NCUA regulations and that anyballots based on the disclosures are invalid. Should a majority ofmembers support the charter change, NCUA must approve theprocedures of the membership vote in order for the charter changeto take place. While the stakes are high for both CUs, they arevery high for Community since the Office of Thrift Supervision andFederal Deposit Insurance Corporation have approved the creditunion's applications, pending the results of the vote.OmniAmerican's applications are still pending with both agencies.Alan Theriault, a consultant with CU Financial Services, whose firmadvised both Community and OmniAmerican, said he still hoped that“cooler heads would prevail” and that there could be compromise onthe matter, but he said the credit unions would reserve their rightto go to court if they believed they had no choice. “That's the wayour system works,” Theriault said. “The three branches ofgovernment have their roles and it's the role of the judiciary toact as a check on the executive.” Theriault acknowledged that acase against the NCUA would face a high hurdle because of thedeference the courts generally give to an industry's regulators.Neither credit union has returned calls about its prospects forgoing to court as of press time. Meanwhile, two Dallas areanewspapers have recently discovered the charter change story at twoof the areas biggest credit unions. Articles in the Dallas MorningNews, the Fort Worth Star-Telegram and the Dallas Business Journalboth outlined the charter change effort generally and reported onthe NCUA's letters as well as the credit union's response.Community CEO Gary Base is quoted in a story in the Dallas MorningNews as saying Community needed to convert charters in order tocompete with banks. “To have the ability to compete with the Bankof Americas, the Chases, you need to have high-quality service,offer all products and still provide locations,” the paper quotedBase as saying. The papers also quoted members of Community whooppose the charter change but Mark Arnold, spokesman for theCoalition for Member Trust, the organization of Community memberswho oppose the conversion, said the groups have not seen much of abounce from the stories. “Essentially, they quoted us, but didn'ttell anyone anything about us, didn't refer to our Web sites anddidn't give any Community member who might want to find out moreabout us a way to do so,” Arnold said. In other charter conversionnews this week, an association of credit union executives inWashington D.C. has organized a public debate or discussion aboutthe charter change conversion question. The Metropolitan AreaCredit Union Management Association of Washington D.C will host adebate on July 11 between Jim Blaine, CEO of the $13 billion StateEmployees' Credit Union, headquartered in Raleigh, North Carolina,and Richard Garabedian, with Washington DC law firm Luse GormanPomerenk and Schick. Garabedian has been a consultant on severalcredit union to bank conversions and his firm is a leader in thefield of mutual holding company formations. The debate will takeplace during the group's July 11 meeting in Arlington, Virginia.Blaine has gone on record as calling for greater public discussionof the charter change question and Garabedian has said he welcomesthe chance to explain more about the charter change question andwhy it might be a good option for some credit unions. -

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