DEARBORN, Mich. – In a move which may further anger, but will likely not surprise members of the $1.8 million DFCU Financial, the board of the CU announced on May 10 that it would not hold a special meeting at which they would have faced a possible recall. In a statement placed on the CU's savedfcu.com Web site, Chairman Hal Lowman and CEO Mark Shobe said the following:

“The request has been determined to be invalid because, among other things, the purpose of the meeting – the removal of the entire DFCU Board of Directors – would be in violation of the Federal Credit Union Act,” the letter read. “We also believe that a proposal as extreme as the removal of the entire Board of Directors, in addition to being legally invalid, is plainly contrary to the best interests of DFCU's members, which your directors have the responsibility to protect.”

Had the credit union decided to hold the meeting, May 10 would have been the day that the CU would have had to inform members of the date of the meeting, most likely May 19.

“DFCU's nine directors will continue to serve the members – no change, no more disruption,” Lowman and Shobe's letter continued. “This determination was made with the best interest of the credit union and its membership at the forefront. We believe it is best for DFCU and members that we return to business as usual. It is the Board's responsibility to act in the best interests of the credit union and its members by protecting the credit union's operations and the members' equity interest in the credit union. This can't be done without appropriate leadership in place.”

The board also took steps to blunt some of the criticism that has helped fuel the recall drive, such as announcing that it would “research and implement a plan to return a portion of member capital now that we have greatly strengthened our financial position over the past six years” and “increase the number of free advisory and educational programs to help members budget, consolidate debt and deal with their finances during these economically challenging times-especially displaced workers.”

The CU had been notably silent when other Ford-based credit unions announced similar plans in the wake of the company's announced layoffs earlier this year.

Reaction to the board's announcement was swift. “Of course we are upset and angered by what they have done but I can't say we are terribly surprised,” said Margaret Blohm, one of the organizers of DFCU Owners United, the members group which first opposed the CU's move to become a mutual bank and then organized the recall drive. “They try to characterize us as a minority group, but now they have sent a letter revealing what they have done to 160,000 members and I predict they are going to hear from an awful lot more members than they have even to this point.”

Over 1,800 members signed the group's petition to call a special meeting.

Blohm said the group has not fully decided what to do just yet, but at least will ask the NCUA to step up to the situation. “This is fundamentally about who owns the credit union which is supposed to be run in a democratic manner and they are not doing so.”

For its part, NCUA sent a letter May 9 to all the CU's board members reiterating the agency's position that the Federal Credit Union Act allows members of credit unions to recall one, several or, if they like, all of the members of a CU's board of directors, according to John McKechnie, director of the agency's office of public and congressional affairs.

This is the position the agency has taken before, asserting that the procedures are established in the standard bylaws for credit unions and are thus in accord with the FCUA.

Article XVI Section 3 of the standard bylaws reads:

“Notwithstanding any other provisions in these bylaws, any director or committee member of this credit union may be removed from office by the affirmative vote of a majority of the members present at a special meeting called for the purpose, but only after an opportunity has been given to be heard.”

McKechnie added that from the NCUA's perspective the matter now rested between the credit union and its members and that the agency would limit its reaction to the board's actions to expressing its opinion that the recall petition was completely lawful.

The Michigan CU League said that NCUA needs to clarify what a board's responsibilities and duties are when faced with unhappy members, according to David Adams, the league's CEO.

“The DFCU credit union's decision to not comply with its own bylaws on the matter of the special membership meeting will undoubtedly raise many legal questions that will have to be resolved by the NCUA or a court of law,” Adams said.

“The credit union's bylaws are a contract between the credit union and its members. The DFCU Owners United group presented over three times the required 500 member signatures calling for a special membership meeting. Now the credit union is saying that they [the board] have decided not to honor the bylaw provision requirements for a special meeting,” he added.

Adams said the MCUL believes that NCUA should become more involved in this matter and stressed that the league does not take a position on whether the board members should be removed or not.

“That decision rests with the members,” Adams said, adding that the league continues to encourage both sides in the controversy to act in a legal, civil and honest manner in carrying out the requirements of the credit union's bylaws.

Bucky Sebastian, CEO of the $2.2 billion GTE FCU and chief organizer of the National Center For Member Trust, blasted the board for refusing to honor its members wishes with a special meeting.

“It's simply atrocious and every credit union professional and every credit union member should be incensed by it,” Sebastian said. “It is a blatant denial of democracy and an affront to part of what credit unions are all about.”

Sebastian pointed out that contrary to the credit union's characterization, during a recall vote every member of the board would be recalled or not on his or her own and there would have been no vote to recall the entire board in a body.

“They have simply mischaracterized this, just as they have mischaracterized everything about this entire attempted conversion,” Sebastian said. “Recall votes are part of the basic structures of democracy. In California they recalled the Governor, for example,” he said, “and it's entirely reasonable that some credit union members might want to vote out a board of directors that thinks their CU can do better as a bank and should be a bank.”

-dmorrison@cutimes.com

Instant Insights /

DFCU Financial Board Invalidates Petitions, Calls Board Recall Effort Illegal

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