Prelude to a Lawsuit? - First Basin Takes Dissident Members To Court to Extract Depositions

ODESSA, Texas -- Another credit union that tried to convert to a mutual bank charter and then withdrew its application appears poised to sue members who opposed that move and helped organize other members to oppose it.

The $115 million First Basin Credit Union has obtained a court order allowing it to depose three members who opposed the conversion and helped organize the members' group Save First Basin on the grounds that they may have slandered the credit union's leadership in their opposition. First Basin first suspended its charter change application in February before the end of the voting period and then withdrew it. It did so because it alleged that members were being lied to about the conversion attempt.

"Letty Ayala-Moreno, Carol Uranga and Sylvia Acosta signed a letter which was mailed to First Basin's members. The letter and other communications contained false, defamatory and disparaging information about the credit union and its officers and directors," alleged Shem Culpepper, First Basin's CEO in a prepared release about the move. "In our view, the letter, a Web site and other activities may have created a cause for slander. We want to ensure fair and balanced information is being provided to our members. It hasn't been, so we launched an investigation."

But Moreno countered that she and the others are not worried about the deposition. "All we have done is tell the truth," she said, speculating that the move might be a scare tactic by the CU that still has not set a date for its annual meeting, at which time members could replace three of the board members; First Basin has until the end of March to schedule and hold the meeting with 15 days notice.

Texas law permits a party to seek depositions if it suspects there may be cause for legal action, according to sources familiar with Texas civil procedures. Texas Rule of Civil Procedure 202 does not require a potential plaintiff to prove to a court that he or she has the grounds to file a lawsuit, only that the likely benefit of discovering the information outweighs the cost of getting it.

The rule is widely considered to be a strong tool in hands of plaintiffs who suspect they may have a cause to sue but lack sufficient information to bring a case.

"The credit union's business prospects and financial condition, and the reputations of our board of directors, have been damaged," Culpepper said. "We respect the rights of any member to disagree with our proposal, but we want to get to the bottom of what happened and set the record straight for the benefit of all our members."

Culpepper did not return calls or e-mail seeking further comment on what the CU considered to have been slanderous conduct by opponents to its charter change proposal.

Wrong Number

Legal documents the CU filed to support its case for deposing the three members included a one-paragraph affidavit, in both Spanish and translated into English, signed by a credit union member, Maria Sigala, which alleged that she had been contacted by an unidentified person who told her she had to vote against the conversion to protect her accounts. They also included a page from what appeared to be the first draft of the letter Save First Basin sent to other members about the conversion attempt and a press release from the Save First Basin group.

"There was an incident recently in which I received telephone calls from an unknown number requesting to speak with my husband, Miguel Sigala," the affidavit read. "On one of these calls from the same unknown number, I asked them if I could help them because my husband was not available, and they accepted to speak with me. The call was in regards to the conversion of First Basin Credit Union to a bank. This person indicated that I had to vote against the conversion. Should I vote for the conversion, this person said I would lose the funds I have deposited at First Basin and that First Basin would close my account if the conversion to a bank took place."

Moreno has denied anyone from Save First Basin either made calls like this or had a hand in making them. She has also pointed out that the members group lacked the phone numbers or other contact information for other credit union members outside their own organization to make such calls.

The CU also appeared not to have communicated to the court that the one page of the member letter that it offered as an exhibit came from a letter that was never actually mailed to members. The version of the letter that was sent was reviewed by NCUA, which negotiated changes with the members group and the CU. This was also not communicated to the court.

Hidden Agendas

There were signs, however, that the target of the depositions was not really Save First Basin but the National Center for Member Trust, a credit union advocacy group that supports members who want to retain their CU's charter in the charter conversion process.

Culpepper called the members the CU sought to depose mere "puppets" for the NCMT and depicted the credit union industry as victim to a "hapless" situation.

"The Save First Basin group appears to be merely puppets for a well-funded, radical credit union industry group based in North Carolina. Its hidden agenda is to preserve the hapless status quo in the credit union industry. These outsiders have no stake in our community or our credit union, but they routinely interfere with credit union charter conversions across the country. We have to start with deposing Ayala-Moreno, Uranga and Acosta in order to reach the real culprits."

NCMT said it regretted the action and expressed confidence that the CU would eventually hold the annual meeting that its members were requesting.

"It is sad to see that Mr. Culpepper and First Basin's board are taking legal action against members for having exercised their legal right, as owners of the credit union, to oppose the conversion proposal. We trust that Mr. Culpepper has determined that costly legal action is in the best of interest of the credit union's members," said Randy Chambers, a leader of NCMT and chief financial officer for Self Help Credit Union, headquartered in Durham, N.C.

"To date, he has failed to inform members of how they voted or hold their annual meeting. We question how members gain when the democratic process is ignored, or when you call your members 'puppets'," he added.

Indeed, Moreno said she would not be surprised to learn that the depositions were meant to discourage members from insisting on the annual meeting, where the members' group hopes to vote out some of the board members who supported the conversion.

Save First Basin maintains that the CU's bylaws require First Basin to hold an annual meeting before the end of March and to give 15 days notice of the meeting date. They said the CU has not done that, and they are pressing it to do so.

Regulatory Affairs

The opposition group might find an ally in the state's credit union regulator. The Texas Credit Union Department declined to comment directly but said it was keeping an eye on the situation.

The department does not enforce credit union bylaws, but credit unions chartered by the state are required by state statute to hold an annual meeting, although it does not say when it must be held, according to Harold Feeney, commissioner of the Texas Credit Union Department.

Members of First Basin Credit Union have said that the CU's bylaws call for the credit union to hold its annual meeting no later than the end of March, but that the CU has not yet set a date. The members want the annual meeting because they want to mount a slate of candidates to run for the three board seats up for election.

When asked whether the statute's language meant that a credit union would have to hold an annual meeting no more than 365 days after its previous annual meeting, Feeney said the department was reviewing the issue of how to interpret and enforce the statutory requirement for credit unions to hold annual meetings.

--dmorrison@cutimes.com