On Oct. 3 the saga of Community Credit Union’s conversion to a bank was in many ways over. You see that was IPO day for ViewPoint Bank, the former Community Credit Union. Many credit union faithful point to greed as the primary reason credit unions convert to banks. I agree, but we will never really know if greed played a role, and I guess it would be unfair to say so. What we do know is 14 insiders profited nicely. The bank’s stock appreciated 50% in one day!!! CEO Gary Base’s 30,000 shares were worth about $450,000 at day’s end–a $150,000 profit. ViewPoint Chairman James McCarley netted a $137,000 profit on IPO day. That’s a big chunk of change considering McCarley was an unpaid credit union volunteer board member just over a year ago. But hey, McCarley put in his time; he was on the board since 1992. In fact, the majority of ViewPoint’s board members are veterans. So Base made out, McCarley made out and so did the rest of the board and management team to varying degrees. All totaled the 14 insiders cumulatively picked up close to a million dollars. I realize that not all of the die-hard credit union people reading this view what Base engineered as a bad thing. This is America, a capitalist society, what’s wrong with Base making $150,000 in one day? After all it was Base who really put that credit union on the map. No one can dispute that. Base was one of only two CEOs in Community’s history. For those who don’t know Base’s contribution, he turned that credit union around. It was tanking when he got there and his record speaks for itself. You could say he was ahead of his time with his focus on business lending. He deserves credit for that. He saw the importance of mortgages and built an impressive department that serviced mortgages in-house. His credit union was always cutting edge in a number of areas, and that starts at the top. This is clearly a sophisticated CEO. The problem of course is it wasn’t Base’s credit union to convert, and it wasn’t McCarley’s credit union to convert. It was the members’ credit union. It’s really that simple. I heard GTE FCU CEO Bucky Sebastian say something recently about the conversion issue that struck a chord. This isn’t an exact quote, but it went something like this: Those who understand the genius of the credit union model, can’t not understand it. Those who don’t understand the genius of it, will never understand. The genius of the credit union model is very simple: it is an institution that exists for its member-owners, and that’s it. Thus, outside influences such as stockholders will never affect decision making by credit union leadership. Leaders answer only to the member. Those leaders who convert a credit union shatter the concept of a credit union. The lure of cashing out has no place in the credit union model. Why not just start a bank? It’s very easy these days. New banks are popping up all over the place, many with one goal–to be acquired so the founders can cash out. Conversion proponents contend that Community’s leadership isn’t to blame for the conversion, because ultimately it was the members who voted to convert. Not true in a couple of ways. First, it is the leadership that drives the conversion. Second, only 20% of the CU’s 200,000-plus members even voted. Now you could say that member apathy isn’t the fault of Community’s leadership. If members didn’t find it important enough to vote against the conversion, maybe they didn’t care. But I think it’s more of a case of them not understanding what was at stake. The Community disclosures to members weren’t exactly clear. They were fouled up because of the infamous fold. Was how a piece of paper folded such a big deal? Don’t listen to me, look at the facts. By the third ballot, when the fold was corrected, a majority of members voted against the conversion. If only that third ballot was used, the vote would have failed. Maybe it wasn’t the fixed fold, maybe it was the fact that by the time that third ballot was sent out the conversion was making news and more people were aware of it. I heard one high-profile credit union leader say recently that as long as there is full disclosure to members, conversions will always fail. That couldn’t be more wrong. Full disclosure has to be there, but it isn’t nearly enough. Who really reads those lengthy proxies for changes to a mutual fund or insurance company? You have to assume the same thing for credit union members when they see a disclosure come their way. That’s not apathy, that’s reality. Members are so busy we can’t expect them to pore through disclosures. I’ve said it before and I’ll say it again, the only sure-fire way to stop a conversion is in the press. The conversion issue must get picked up by the local press on a regular basis to raise awareness in the community. The only way that happens is if a member opposition group forms. We saw this in the conversion attempts of DFCU Financial and Columbia Credit Union, and both attempts failed. The industry has certainly learned from Community, and is in a much better position to defend against them. So while some may begrudge Base and his crew for picking up nearly a million dollars in one day, I think Base did credit unions a favor. He put this issue on the map. No longer do the trade associations avoid the conversion issue because only a handful have converted. They understand the threat and it’s here to stay. Thanks Gary, we owe you one. P.S. To those conversion consultants out there who say members also have the ability to get in on the IPO and profit, only 3,500 ViewPoint “customers”–less than 2% of the total–subscribed to the IPO. Give me a break, the IPO is for insiders.