Conference 7.286::dcu

    I am running for the board of directors......Thanks for letting me 
    know!

    I wonder how long before he does the same to DCU?  Whats to stop him?
    
    	- mark

     DCU confirmed today, that he was fired as of 5 April 1991!
     
     I do  hope  that  the  NCUA does a full audit of DCU to determine if
     DCU might have been similarly used for any wrong-doing.

    Gee, I expected a response, but not that one!
    
    Seriously, I don't want to judge Mangone on what might have been
    illegal about those dealings, but I don't want my banker to even give
    the appearance of impropriety.  I applaud the board's decision.
    
    Tim

I would hope that the Board of Directors would do a special audit using a 
firm other than the current auditors.

    
    Many questions here...
    
    Are the DCU auditors the same auditors as the other credit union?  Who
    was supposed to be watching/evaluating the DCU President?  Or any of
    the other officers for that matter.  With everything going on in the
    financial community, I would expect a COMPLETE investigation and audit.
    
    Out of curiosity, how long was this guy President?

Richard was the only president that DCU has ever had.

Your elected board of Directors is responsible to oversee the President.  I 
would hope these questions would be answered at the annual meeting but if not
then they should be brought up from the floor at the meeting.

     RE: -.1
     
     Typically, NO ONE from the DEC Members attends the Annual Meeting!!
     
     Perhaps we  should  make  an effort to attend this year and ask some
     pointed  questions?    Although I sent my ballot in, I don't  recall
     when  the  meeting  is.  [I've always wondered why I can beat  DCU's
     interest  rates  on  savings  in  any  CU  I've  ever  been a member
     of/checked into.    In  fact, some commerical/savings banks can beat
     DCU.]
     
     DCU has  been  playing it real "cagey" about releasing the info that
     the President was  terminated on 5 April 1991.  Members who call get
     the run-around, put on hold for extensive  periods  of  time  before
     being  passed off to  the  next  person  (and  repeating  the  above
     process), asked who they are  &  badge  #,  etc.    and  if they are
     persistent enough, DCU will finally admit the fact.
     
     BTW:   He  was  the  ONLY  President that DCU has ever had!!  I also
     think that he is the person that Ed Fultz (sp?) and I met with a few
     years ago (see much earlier notes on meeting with DCU).

        I'd go if I wasn't out here in Chicago, 984 miles from DCU. At
        times like this, I've been known to be quite vocal, and disruptive
        if necessary, at such meetings. I'd like to hear the full story,
        and if appropriate, someone on the floor should ask for the whole
        board of directors to resign on the spot!
        
        Perhaps someone should contact the NCUIA or whatever their name
        was, and ask them to check into things, just to be safe.

re .1
I have not yet voted but am making up my mind at this time.

Rich , what would you do to verify that no improper actions/loans involving
employees/past employees/Board of Directors have occured or to prevent any such
action in the future ?

How about making a public record/announcement of any loan transaction that is 
made to anyone in the approval/management process such as BOD/President/
loan committee/etc. ?

Re .10
It seems simple to me that a credit union is much like a bank.  They rent money
from the depositors by paying interest and rent/lease money from other sources

They then rent/lease this money to others by charging interest.

As a non-profit organization the difference between the two is the expense to 
run the CU which includes the buildings- salaries - cost of ATMs - and losses
on loans.

Now banks do the same things but they also have to return a profit to their 
stockholders in addition to the expenses.

If this is essentially true, then a C.U. should be able to pay a higher 
interest to its depositors or charge a lower price for their loans, or some 
combination of the two to account for the lack of a profit to be paid to their
stockholders.

The DCU and other CUs quite often are at best competitive with or even higher
than banks and I don't understand why.

Again Rich, what would you do to "open up the books" so that we the "owners"
(members) can get a good look at the makeup of the costs of doing business.

I would like to see 
Salary per employee compared to Credit Unions and Banks of similar size.
Loss experience compared to other CUs and Banks of similar size
Cost of processing a loan compated to ....

In basic terms, how is our CU doing compared to other similar institutions.

Although I have addressed these questions to Rich, I would invite replies to
any candidate for the BOD to help us make an intelligent choice.

    First of all, whomever was President of DCU has only been CHARGED with
    impropriety at the other credit union --- he has not been CONVICTED. 
    (Need I explain the subtle difference?)
    
    Second, whatever evidence led to the charges of impropriety was only
    revealed recently.  Any alleged wrongdoing may have gone undetected at
    that credit union for quite some time.  Are the previous noters
    expecting some sort of clairvoyance on the part of the DCU board?
    
    Third, there are auditors that DCU hires to verify the financial
    statements and to determine compliance with various regulations,
    procedures, and controls.  If any improprieties have taken place at
    DCU, and the auditors didn't discover it, what did you expect the board
    to have done?
    
    I could go on, but I know when to stop.  I think there should be a
    7-day waiting period on rope, not guns, seeing how quick some people
    are to hang the innocent on the basis of a few press reports.
    
    For what it's worth, I applaud the DCU board in terminating the
    contract; I feel it was a prudent action, but I hope it was
    unwarranted.
    
    For those of you who, like the DEFENSE_ISSUES notes file during the
    Gulf War, just "tuned in", you should be advised that for many years
    this file has consisted primarily of people who seem to revel in taking
    cheap shots at a very well managed credit union.  Nothing has changed.
    \Gary

RE: Note Topic 240; Titled: "DCU prez involved with failed Cape credit union"

    This is an official response by Mary Madden of the DCU. The response,
    dated 11-APR-1991, applies to this note topic and is included below.
    See note 2.22 for more information.

    Your comments on this response should be posted here or directed to
    to DCU directly at Mary Madden's number (dtn) 223-6735 x207.

    Carl Leeber
******************************************************************************
In response to questions that have been raised, this is to confirm that Digital
Employees' Federal Credit Union's Board of Directors voted unanimously to remove
Richard Mangone from his position as DCU President and terminate his employment
with the Credit Union effective April 5, 1991.  Like any termination of a high
level officer, this termination will require considerable coordination between
the Credit Union staff and the members.  However, this termination has no
material adverse impact on the financial soundness or operations of the Credit
Union.

If you have any additional questions, please contact Mary Madden, Communications
Manager, ext. 207.
******************************************************************************

    RE: .12

    Grow up will you.  Every reply of yours says the same thing about a
    different topic.  Let other people express their opinions just as you
    have expressed yours.  

>    For those of you who, like the DEFENSE_ISSUES notes file during the
>    Gulf War, just "tuned in", you should be advised that for many years
>    this file has consisted primarily of people who seem to revel in taking
>    cheap shots at a very well managed credit union.  Nothing has changed.

    And since when have you been elected the spokesman for this conference?

    As for other people's replies, many valid questions have been raised. 
    None of which was answered by the "reply" in .13.  Everything in .13
    was already reported in previous replies.  Where are the real answers?
    What types of restrictions or controls are placed on loans to officers,
    etc.?  I'd like to clue .12 in to the fact that this type of activity
    is exactly what brought down so many S&Ls in this country.  And all of
    those were audited by "respectable" accounting firms.  And those
    accounting firms did nothing to expose or stop what was going on.
    Would you rock the boat of a multi-million dollar account?

    I asked in a previous reply how long this person had been President of
    DCU.  The answer was that he was the only President DCU ever had.  As I
    filled in my vote for BOD, I noticed that the incumbents had been in
    there 9 & 11 years (if I recall correctly).  I wonder how long DCU has
    had the same auditor?  Do you see where I'm headed here?  I wonder if
    the BOD, DCU officers, and auditors have become "positions for life"? 
    If this is the case, then I believe there should be limits put on how
    long these people can hold certain positions.  Also, very strict
    disclosure in the annual report (does DCU ever send them out?) of any
    and all officer/BOD loans, DCU holdings, etc.

    I'd also like DCU to answer some of the real questions instead of
    stating the obvious in a content-free reply.

    Phil
    

Good reply Phil. I almost entered a flaming reply to .12 but decided not to
dignify it with a reply, it being so void of content.

Let's keep asking those questions about the DCU until they answer. Obviously,
everything isn't peachy at DCU-land.

-Glenn-

    What worries a lot of us, is the problem that Rhode Island just had. 
    It scares you to think that they were Ok, until some guy bilked the
    association of the 'security' money.  Is DCU in the same boat?  These
    are good questions that need to be ansered when such an unusual event
    occurs.
    
    We all must be concerned about DCU and our money.  It would be prudent
    for each of us to get the monthly P&L and examine it.  Ask questions.
    
    
    	- mark

    When will DCU disclose to it's membership, the full account of this
    incident?  

    As I see it, if the BOD has in it's unamity, seen fit to dismiss 
    Mr. Mangone from his position, then it also holds that they have evidence 
    to an impropriety which has potential ramifications to the membership of 
    DCU.  Furthermore, I find that Ms. Madden is not forthcoming with the
    answers that the members of this conference (and probably DCU memembers et.
    al.) are seeking.  

    As a member, I want to know what steps DCU is taking to investigate this
    escapade, and if DCU will be be somehow be accountable, or otherwise
    effected.

    -Jp

Re Rhode Island CUs:

As I understand it, the problem with the RI CUs was that they were insured by
some local (private?) insurance fund.  The failure of one member CU, brought
about by the misdeeds of their mob-connected president, wiped out the fund.

DCU is a member of a national insurance fund that's on the level of the FDIC
or the FSLIC.  Congress has shown that it's not about to let either the
FDIC or the FSLIC fail, so I doubt if they'd let the NCUA (?) fail.

re .17

When will the DCU disclose the full account of the incident? Well, I would
hope that there are two gating factors on this. 

1. That a full investigation/audit is conducted before anything public is
said or published. Publishing opinions, suppositions, and the like, leaves DCU
and us, it's members, open to legal retailiation by Mr Mangione.

2. That it wait until the next "normal" communication after item 1 has been
satisfied to pass this information onto the members. A special mailing to all
DCU members will cost several thousand dollars.

I, for one, have faith in the officers of the Union, that they are taking care
of this matter in our best interests, and should be left to do so, until the
dust has settled and an accurate rport can be made.

Peter Q.

re: .17, Jp,


>    As I see it, if the BOD has in it's unamity, seen fit to dismiss 
>    Mr. Mangone from his position, then it also holds that they have evidence 
>    to an impropriety which has potential ramifications to the membership of 

Maybe not.  It was probably a pure CYA move on DCUs part.  The right move IMHO.

I also agree that a special audit, performed by someone other than our current
audit firm, is needed ASAP.  If we have a problem, let's find out NOW.  This
will be money well-spent.

Bob

    I too,  called  up DCU and got the standard response from the so-called
    communications people.  They are not programmed to respond in any other
    manner I guess.

    It was  entirely  within  the  realm  of  possibility  to  me  that DCU
    dismissed  him  as  .20 suggested.  If that's the case, they should say
    so,  and  I  probably  would have been satisfied with that.  They could
    have  nipped this thing in the bud.  I don't see how Mangone could have
    done anything if DCU had said that.

    However, when  they  started  sandbagging  with the standard line about
    "confidential  personnel  files",  that  sort  of  thing makes me think
    there's  something  more  that  we  should  know  about.  I think we as
    customers  of DCU have a right to know why any top level executive gets
    suddenly fired, especially with all the S&L sleeze going on these days.

    Hi Bob!

    I have to dissagree.  If BOD dismissed him, then they had to have cause or
    the BOD would be setting themselves up for a wrongful dismissal suit.

    On the other hand, I do agree with the special audit. Hmm, i wonder...do
    financial institutions normally perform audits when there is a change in
    senoir management?  

    I also (re: a couple back) believe that DCU should prepare a formal 
    statment that could be included with the mailing of the April statements.
    It should outline the steps that the BOD is taking, to ensure members
    confidence in the institution.

    Just more fodder for the cannon...

    -Jp

re: .22, Hi Jp,

I suspect that in the case of a financial institution, the indictment would be
reasonable "cause".  Of course, since we aren't privy to the employment contract
between DCU and the prez, it might be a moot point.

What I meant by CYA in this case, was, suppose the BOD didn't dismiss him and
it was discovered at a latter date, that he had done the same to DCU as he had
done to the other CU, and continued to do so after the indictment.  Now,
wouldn't you be howling for the BOD to resign after that discovery?

Bob

There was in interesting article in the GLOB this morning that indicates that 
the Directors of a BANK have been judged liable for the actions of the workers 
in the bank and that simple ignorance is not an excuse.  It was not totaly clear
but it appeared as if in the case referenced, loan officials were approving
improper loans and the BANK lost money on those loans.  This would be appear
to be similar to the situation  reported in .0

Recognizing that the DCU is not a bank, it is still a Financial Institution and
the same law may apply.  If someone has a scanner and can post it here, there
might be some better understanding by all.

    Re .many:
    
    I believe the Board of Director's actions are consistent with their
    fiduciary responsibility to the share-holders (us).  The officers and
    board of any corporation, and ESPECIALLY a financial institution, are
    in positions of trust that require that they retain credibility.
                                                     
    Whether or not DCU's president has engaged in illegal activities with
    DCU funds, he HAS breeched his fiduciary responsibility to conduct
    himself in a way that leaves his credibility beyond question.  The
    Board of Directors really had no choice but to dismiss the president
    when the credibility upon which his effectiveness hangs dissolved.  Had
    they not acted to protect DCU's assets once they became aware of the
    president's outside activities, they would have been (individually and
    collectively) guilty of malfeasance under the law.

The article that I referenced was in fact an editorial.  boston glob
Thursday April 18, page 13 byline John T. Galvin

In the past year, many banks in New England have foundered, and federal
regulators have predicted 180 banks across the nation could fail in 1991.
Twenty-four, with assets of $2 billion each, are located in New England. Who
is responsible ? The directors of the banks.  They should be questioned about
what they did - or attempted to do - to avoid this calamity.
According to a 1930 Massachusetts Supreme Court ruling, the directors
of a bank "invite the confidence of the depositing public and must
afford the protection thereby implied.... They are entitled to rely
upon the the protection implied.... They are entitled to rely upon the
information and advice given to them by executive officers whose
probity and compentency are not under just suspicion, but they cannot
surrender to them the responsibilities resting on directors."  
directors "are liable for the negligence in the performance of those
responsibilities, even if they have acted in good faith."
        
Lending policies should be approved by the directors, who should conduct
regular reviews of lending action in keeping with those policies.  The bank's
audit committee should supply the directors with information about loans that
could go bad, as soon as they get the hint of something wrong.  It is then the
responsibility of the directors to initiate quick remedial action.  The next
step should be to review the performance of loan officers.   And if a if a top
official of the bank is encouraging loan offers to be cavalier, his or her
performance is in question.

Attention should be given , monthly to capital adequacy and compliance
with the federals government's capital-ratio requirements, including
forecast for the rest of the year.  There also should be a monthly
review of the adequacy and potential of the loan-loss reserve.  Inquiry
about the risks being created in  concentrating loans by industry or
geography could provide clues to potential trouble.
A bank differs from a business corporation in that the public is invited to
deposit funds on the understanding that such moneys will be held and managed
without undue risk, under rules and regulations adopted by the board of
directors.   The failure of a bank is tragic for stockholders, clients,
employees and the community.  It is almost unbelievable that some directors
did not perceive that by loaning money - and too much of it - on questionable
projects, they were heading for disaster.
The banking industry should undertake sweeping reforms.  Too often,
directors simply rubber-stamp whatever the bank's chief executive
officer wants to do.  One fundamental change should involve selecting
directors not from the bank's best customers, but from the outside.
Stockholders and depositors should insist on having disinterested
directors,and the directors should insist on getting accurate, current
information on loans, who is asking for them and for what purpose and,
most important, the bank's ability to lend money for such projects at
any given time.
        
Directors of Banks (who are paid for their services) should be called to
account for whether they asked these vital questions and, if they did, why
they allowed irresponsible actions to continue.  If they asked no questions
and took no action, they should be replaced.  It is not enough to say that
failures resulted from "'everyones" faith in a booming economy.  Bank directors
are not "everyone".  They hold in trust the fiscal soundness of our society.
They must be held to the highest standards.

The previous entry was entered by hand so there may be some typos but I did 
try very carefully to get the quotation marks in the right place to diffentiate
between his opinion and the opinion of the court.

I feel that he has made a good case that the directors of a Financial 
Institution have a legal as well as moral obligation to make sure that their
directions are followed.  It is not enough to just hand the guidelines to the 
President or to ratify what he/she proposes and not put the independent 
controls in place that will make sure what is happening.

Suppose that the auditors determine that something improper is happening and
one or more of the BOD is involved.  What obligation do they have to bring this
to the attention of the stockholders or shareholders ?

Does anyone know when the last audit was performed and where one might get 
access to a copy of that audit ?

From:	SAFETY::SEGAL "LEN, 223-7687, MLO6-1/U30  24-Apr-1991 1055" 24-APR-1991 10:22:44.19
To:	INFO
CC:	SEGAL
Subj:	DCU Annual Meeting - THURSDAY (4/25) @ 3PM -  PKO5, 3rd Floor

     For those  of  us located in Greater Maynard area, you might want to
     try to attend  the  DCU  Annual  Meeting  (& Election) being held on
     Thursday at 3PM (DCU is located at PKO5, 3rd Floor).
     
     A few years ago,  when  Ed  Fultz  and  I  met  with  the  (recently
     dismissed) President of DCU and Dan Enfante (Chmn, BOD at the time &
     VP  DEC-IM&T),  they  told us that  NO-ONE  (from  the  general  DCU
     membership) attends these meetings.
     
     Due to the low savings interest rates  (some  commercial  banks  are
     higher, and all CU's that I know of are higher), very large increase
     in minimum charges to keep the DCU VISA "fee-free" (reportedly going
     to $6K/year), loan practices, etc.  it might pay to  make the effort
     to attend this  year's  meeting.    Also,  due  to the circumstances
     surrounding the dismissal of  DCU's  President,  some  questions are
     definitely in order.
     
     Regards,
     
     Len
     
     P.S.  In a departure  from  the  "norm",  I  am  hereby  authorizing
     re-forwarding/posting  of  this  message  (only if done  so  in  its
     entirety, including header info) via MAIL or NOTES  INTERNAL  (Only)
     to DIGITAL.

    Where is PK05 ?
    
    Lloyd

     RE: .29 
>                         -< New floors added in PK ? >-
    
     I hope you're kidding?
     
     The  "5" designates the "Building Number" not the floor number.
     
>    Where is PK05 ?
    
     If you  look  in  the  DEC  Phone  Book  (under  Maynard-p.330), the
     location is 141 Parker St., Maynard, MA 01754-0130, and is listed as
     "DIgital Employees' Federal Credit Union".
     

PKO5 is in front of PKO3.

-Glenn-

    I've worked in PK1, 2 and 3...where's 4 ?
    
    Planned ? LLoyd

     I attended the DCU Annual Meeting today.  Very interesting, about 25
     non-BOD members present, but  almost  all  of  them appear to be DCU
     Employees  (who  no  doubt are  also  DCU  Members).    There  is  a
     requirement for a minimum of 15  Members  for  the Annual Meeting to
     proceed (quorum).  There were only two  other  people  present  that
     obviously  weren't  part  of  the DCU organization (they  were  just
     common "members").  There were only two people asking  any questions
     (myself and another concerned DCU member).
     
     Mark Steinkrauss (Chmn of BOD),  IMHO, was very forthright about the
     situation with Richard Mangone and his  termination  (which was done
     with  the unanimous vote of the BOD).    He  responded  to  all  the
     questions posed to the BOD, and after the meeting concluded (3:40PM)
     both Mark, Dan Infante, Abbott Weiss, and Susan Shapiro (all on BOD)
     came  over to me (and the other person who asked questions) to  make
     sure that we felt that our questions had been fully answered.
     
     In January 1991,  the  NCUA completed an investigation of DCU.  This
     was prior to NCUA's  "takeover"  of  the  Barnstable  CU.  DCU is no
     longer  under  investigation, but is  cooperating  with  the  NCUA's
     investigation  at  Barnstable.    The  investigation   into  Richard
     Mangone's  dealings with Barnstable CU is still  on-going,  with  no
     charges filed to date.  If Mangone is later charged and found guilty
     of wrong-doing, DCU is prepared to sue him to recover any loses that
     DCU  may  have  incurred  due  to such action (DCU would  also  have
     recourse  against  the bonding company which bonded the President of
     DCU).  All of this depends on the outcome of NCUA investigations and
     would hinge on conviction for wrong-doing.
     
     DCU has a  total  loan  portfolio  of  $270M,  and  $18M of this are
     "participation loans" arranged by  Mangone.    "Participation loans"
     are those loans originated by  another lender (Barnstable CU in this
     case)  and  where  all/part  of  the   loans  are  sold  to  another
     institution  (DCU  in  this  case).   These  loans  are  secured  by
     commercial real estate (apparently in Cape Cod area),  and only some
     of these loans are "non-performing" (not paying DCU on  time), while
     many  of these loans are paying DCU on a timely  basis  (per  Mark).
     DCU is trying "to work out" those loans which are not paying DCU.
     
     Since  DCU doesn't normally loan money for commercial property, they
     have hired someone with expertise in commercial RE to assist DCU  in
     determining  how best to handle these loans.  They are continuing to
     investigate internally to  ensure  that they have identified all the
     areas of risk that  DCU  might  have  been  exposed  to  due to this
     situation.

     I asked the BOD  members  about  the  very  poor  interest rates for
     savings/checking accounts.  Their response  was  that  the  numerous
     branches we have across the US  increases our costs of operations to
     the point where our savings/checking interest rates  are  lower than
     most/all CU's.  I raised the point that  if  the  members  were made
     aware of this, **perhaps** they would agree to accept  the  loss  of
     the local (remote to New England) branches of DCU, provided that ATM
     access  AND occasional service (1 day/week or some other scheme) was
     maintained IN COMBINATION WITH  **HIGHER**  (more  competitive  with
     other  CU's)  interest  rates  on savings/checking accounts.   [e.g.
     PKO3 and PKO5 (DCU HQ) both have DCU branches  and the buildings are
     ~200' apart!!]
     
     I won't report the results of the election, since I  was  unable  to
     write it all down as fast as it was presented, and  I'd  rather  not
     give out the wrong info.
     
     After the  Annual  Meeting  ended  the BOD adjourned to what sounded
     like it was to be an "executive session" BOD meeting.
     
     That's all I  have  in my notes of the meeting.  Hopefully I have it
     all down factually.
     

Len, I saw your note too late to attend the meeting.  Thanks for 
posting a summary.

Were the board members specific about what's costing so much for
all the branches?  As far as I've been able to determine, the
branches do not incur occupancy costs.  And in some cases Digital
owns some of the fittings for the branch (I've seen ATM machines
listed on DIAL.  Can't think of anywhere else they came from.) 

Maryellen

    
    
>     DCU has a  total  loan  portfolio  of  $270M,  and  $18M of this are
>     "participation loans" arranged by  Mangone.    "Participation loans"
>     are those loans originated by  another lender (Barnstable CU in this
>     case)  and  where  all/part  of  the   loans  are  sold  to  another
>     institution  (DCU  in  this  case).   These  loans  are  secured  by
>     commercial real estate (apparently in Cape Cod area),  and only some
>     of these loans are "non-performing" (not paying DCU on  time), while
>     many  of these loans are paying DCU on a timely  basis  (per  Mark).
>     DCU is trying "to work out" those loans which are not paying DCU.
    
    	I find this shocking.  Why is DCU making ANY commercial loans?  Why
    aren't those funds being offered to the membership in the form of
    mortgages?  A lot has been made of the fact that DCU (Digital CREDIT
    UNION) is owned by its members, and is run for its members.  Right now
    we have low interest rates, high loan rates and fees and minimums on
    the rise.  How much of this is due to loans to non-DCU members?  They
    stated $18 million in "participating loans".  Does DCU hold commercial
    loans alone?  How much?
    
    I'm beginning to understand why I was able to get a better auto loan at
    a credit union that I wasn't a member at but ended up joining.  Amazing
    that DCU is lending commercially but only recently went to fixed rate
    auto loans.  I long hard look at DCU lending policies is in order in my
    opinion.
    
    As a member/owner of this institution, how much access to DCU records,
    policys and procedures are allowed?  Has ANYBODY ever seen a DCU annual
    report?  I guess it's time to stop by DCU HQ and start asking for
    copies of whatever is available.  There just have to be reasons why
    credit card interest and minimums are going UP when everybody elses are
    going down.  Reasons why interest on share draft account is .045% with
    a $1000 minimum.  If we can't get a better deal than the local bank
    then what is the point of the credit union?  Have we all forgotten what
    DCU is supposed to offer it's "members" besides convenience?
    
    Phil

    Re .35
    
� > DCU has a  total  loan  portfolio  of  $270M,  and  $18M of this are
� > "participation loans" arranged by  Mangone.    "Participation loans"
� > are those loans originated by  another lender (Barnstable CU in this
� > case)  and  where  all/part  of  the   loans  are  sold  to  another
� > institution  (DCU  in  this  case).   These  loans  are  secured  by
� > commercial real estate (apparently in Cape Cod area),  and only some
� > of these loans are "non-performing" (not paying DCU on  time), while
� > many  of these loans are paying DCU on a timely  basis  (per  Mark).
� > DCU is trying "to work out" those loans which are not paying DCU.
�   
�   	I find this shocking.  Why is DCU making ANY commercial loans?  Why
�   aren't those funds being offered to the membership in the form of
�   mortgages?  A lot has been made of the fact that DCU (Digital CREDIT
�   UNION) is owned by its members, and is run for its members.  Right now
�   we have low interest rates, high loan rates and fees and minimums on
�   the rise.  How much of this is due to loans to non-DCU members?  They
�   stated $18 million in "participating loans".  Does DCU hold commercial
�   loans alone?  How much?
    
    Financial institutions often buy and sell "paper" representing loans of
    various types.  One of the reasons this happens is in order to keep the
    deposits "at work" even when their customers aren't actively seeking
    loans.  (For example, the mortgage on my home has been sold twice in
    its four-year lifetime.)  It troubles me that close to 7% of DCU's loan
    portfolio came from a single (now questionable) source.  That's a lot.
    
�   As a member/owner of this institution, how much access to DCU records,
�   policys and procedures are allowed?  Has ANYBODY ever seen a DCU annual
�   report?  I guess it's time to stop by DCU HQ and start asking for
�   copies of whatever is available.
    
    I've never seen a copy of the annual report.  By law, copies of the
    bylaws must be available for inspection at each branch office, though
    I'd be surprised if that were actually the case.  The DCU bylaws are
    actually the standard NCUA base document with a collection of addenda. 
    
    The DCU bylaws don't say anything surprising.  They mostly deal with
    the organization itself (who may join, the titles and responsibilities
    of officers and committees, conduct of meetings, etc) and they refer to
    "applicable law" and other NCUA regulations a lot.
    
    I've found one "clinker" that might bear upon the current situation.
    Despite the great care the bylaws take to assure a conservative loan
    policy, "investments" (which may include buying promissory notes from
    other credit unions) are only constrained by "applicable law" (and may
    therefore bypass the loan committee).  I think I smell a loophole.

    
    RE: .36
    
    My understanding of a "participating loan" (correct me if I'm wrong) is
    when more than 1 institution (in this case DCU & others) combine their
    resources to make a loan to a single borrower.  This is done when the
    loan amount is too large for 1 institution and to spread the risk. 
    I'm not sure it's the same as the buying and selling mortgages.  Thus
    my question on how much commercial loans are there that are
    "non-participating".  In other words, DCU alone has loaned money.
    
    At least this is my understanding.  But again I must ask, why is DCU
    loaning in this market when there is probably more than enough
    membership demand for reasonable priced auto loans and home mortgages?
    I certainly don't keep my funds in DCU so some developer on the Cape
    can overbuild it 'til it sinks!  Then when I need a car loan, DCU is
    more expensive than many other places.
    
    Maybe we should be asking for a meeting with this "Loan Committee"?
    
    

  Today I got my monthly statement and it contains the same terse statement
about Mangone that was posted here earlier. That's why I'm reading this confer-
ence. This is the first I heard about this "incident".
  Re expense of operating branches all over the U.S.: Yes, this is something
that doesn't happen with banks and S&L's, and not with many credit unions.
Even if the full-service branches don't pay a dime in rent, there is still a
major added expense in operating a branch that's 500 miles from the nearest
similar branch. I don't think converting remote branches to part-time would
help because DCU would still incur most of the costs associated with long-
distance management. Converting an isolated branch to ATM-only would be a great
disservice to members at that location, and I hope this is not being considered.
  I'm glad I'm reading this file, because I didn't realize until now just how
far we are behind the competition. This being the case, the only reason I can
think of for doing business with DCU is the convenience of banking while at
work. Of course, most people only have one or two credit unions to choose from,
but there are usually 3 or 4 banks in convenient locations.

    Reprinted without permission from the Cape Cod Times.


   HYANNIS- A Barnastable credit union scandal has spread to the Digital 
Employees Federal Credit Union, which is suing its former preesident over 
$18 million in bad real estate loans,primarily on Cape Cod.
     The civil suit claims that former president Richard M. Mangone of Norwell
generated the loans while also an officier and investment adviser at the 
Barnstable Credit Union in Hyannis.
    But it was his employer, the Digital credit union, that bought 75 to 90
percent of the participation loans and stands to lose more than $10 million,
plus costs, the suit says. Participation loans are shared by more than one 
lender.
    The total value of the loans, all in default, amounts to 5 percent of the
credit union's $371 million in assests. The credit union's members are employees
of the Digital Equipment Corp., a seperate corporate entity. Digital is major 
computer manufacturer based in Maynard.
    "Mangone played a central and pivitol role in the origination,administra-
tion, and management of these loans, which involved extensive fraud and other 
acts of wrongdoing," the suit says.
     With "straws"- stand-in borrowers- fake income tax returns and financial 
statements and grossly inflated real estate appraisals, Magone shepherded loans
through the Digital credit union's board of directors,the suit states.
     In one case the board never approved the loan, yet $3 million was 
transfered at Mangone's order to the Barnstable credit union and paid to 
unknown parties, the suit states.
     Mangone is charged with fraud and deceit,gross negligence,breach of
 contract and unlawful use of Digital credit union funds. The suit also seeks 
to attach $157,000 in Mangone's account at the credit union.
     The suit also names three "John Does",unidentified people who also 
"participated in and were the recipients of certain fraudulently obtained loans 
porceeds at issue", the suit states.
     The suit claims to describe in detail how credit union insiders financed 
millions of dollars worth of real estate speculation through the two credit 
unions in the late 1980's. 
     Such speculation also was described in March in a Cape Cod Times series 
about how deeds and mortages for subdivisions and lots moved among credit union
officials,relatives,business associates,secretaries,and subcontractors. The
paper trail concealed inflated propoerty values and debt from lenders and
regulators. 
     In the Digital suit, the 12 participation loans showed ties to James K. 
Smith and Mangone, both credit union founders and business partners, and their
former partner Ambrose Devaney. Smith is a Barnstable developer. Devaney is a 
developer from Rockport.
     For example, the loans bear the names of Charles Ryan, a construction 
supervisor for Smith; Devaney; John Schulenberg of Barnstable, Smith's brother-
in-law,Jeffery Shaw of Centerville,a masonary contractor for Smith; Robert
Churchill of Yarmouth, Smith's real estate associate,among other unknown real 
estate trustees.
     Similar transactions led to the BArnstable credit union's takeover March 
20th by federal regualtors for illegal business loans to a select group of 
borrowers.
     Those activities are under investigastion by the FBI, The U.S. Attorney's  
office, criminal and civil attorneys for private parties.
     Judging from the detail in Digital's court suit, some of the "straws" or
trustees who held property for credit union insiders are now talking to those 
investigators.
     Due to his involvement in the Barnstable credit union, Mangone was fired 
April 5th by the Digital credit union.
     A related foreclosure action last November, brought by Berkshire County
Savings Bank, named real estate trustees Robert Cohen, then attorney for the 
two credit unions; Barnstable councillor Nichael O'Niel,also a Hyannis lawyer;
John Kenney, O'niel Law associate; Steven Jones, Smith's brother-in-law and 
Hyannis lawyer; and Malden lawyer Richard Murphy, then a Digital Lawyer. 
     The Digital credit union suit was filed May 23 in Brockton Superiror Court
in Plymouth County by Charles B. Janes and Marcy J. Levine, of Bingham,Dana, and
Gould of Boston.
     Since 1987, Barnstable credit union officials and Mangone have repeatedly 
denied publicaly that the Digital credit union was participating in such loans.
     "We're not... a participatory lendor;... we do not buy loans." said 
Mangone in early February, speaking as the Digital credit union president.
      He also pooh-poohed any questions about the health of the Barnstable 
credit union's loan portfolio and said, " You're in a long line of 20 
examinations by professionals a lot sharper than you and I. We've never had any
problems with any of these values. Other participating nbanks also got involved
and looked at these properties. We're just not selling a pig in a poke."
     Digital's suit allegedly describes how Mangone and others, as yet unnamed,
were able to sell a pig in a poke to the boards of the two credit unions, the
federal regulators,and private auditors.
     In April 1990, Smith asked Charles Ryasn to be trustee of MazellII Realty 
Trust, the suit states. Ryan was employed as a construcrtion supervisor by 
Centerville Builders Inc., believed to be owned by Smith, according to the suit.
     Smith said he wanted to get a $1.5 million loan to buy Ahser's Heights, a 
67 lot subdivision at Asher's Path and Routew 28 in Mashpee.
     Supporting dosumentation for the loan included an apprasial report that
put the subdivision's value at $5.2 million, or $78,000 a lot as of June 14.
Less than a year later, its current value is about $15,000 a lot, the suit 
states.
     The property's deed lists a proce of $1.4 million. That is $2.71 million 
less than the $ 4.15 million participation loan issued by Digital credit union.
     The documents showed his net worth as $8.86 million as of December 31,1989,
when in fact, Ryan has never possessed a fraction of that.
     Mangone didn't even take that $4.4 million loan to the Digital credit 
union's board. It was the largest particapation loan in the credit union's
history at a time when the Cape Cod real estate market was depressed.
     Instead he instructed a Digital employee to transfer almost $3 million,
Digital's share, to the Barnstable credit union. At least 75 percent was given 
out in a single transaction to unknown parties. 
     Building still hasn't started in the Mashpee subdivision and the loan is
in default.
    

    
    Now doesn't this all start to make sense?  Our saving rates suck, our
    loan rates are high, and Visa rates are increasing when others are
    falling?
    
    This should be posted outside of every DCU branch along with a 
    signature sheet calling for the resignation of the board of directors,
    the hiring of a new auditor and new elections for the BOD.
    
    How was Mr. Mangone able to get $18,000,000 dollars "shepparded" by the
    BOD?  Is anybody awake on this board?  If he went for all of the funds
    would have they suspected anything then??  This is too scary and too
    close to home.  I don't need the convenience at this cost.  When DCU
    cleans it's house up, I'll re-consider re-depositing my funds.  Until
    then, it's off to close my accounts.
    

    Re .39:
    
    If the explanation given here is accurate, this is WORSE than my
    wildest fears.  I'm not ready to make a "run on the bank" (that's why
    deposit insurance was invented in the first place), but I'm also not
    likely to enter into any new financial relationships with DCU until the
    whole thing is straightened out.

    Of course DCU will deny the newspaper report...
    
    I tend to like Granite State more and more every day...
    
    	- mark
    

    Hello official DCU representative (Mary Madden?). Please would you
    comment on .39 IN DETAIL. As a DCU member I am extremely displeased
    that all I've heard OFFICIALLY about this SCANDAL is the meely mouthed
    insert in a recent monthly statement. We deserve better than this.
    If .39 is anywhere close to the truth you have a massive audit problem,
    please detail how you are going about fixing it. This is a disgrace.
    
    Dave, one pissed off DCU member

Well, I'm not about to go withdraw my business from the Credit Union, because
I don't feel that the Credit Union at large is responsible for any of this.
Likewise, I'm not necessarily waiting for any official statement to be made
by a Credit Union spokesperson.

I am wondering why the long term DCU BoD members, many (all?) of whom are
Digital employees, are not resigning from the BoD in shame for having allowed
such improprieties to take place under their tenure. I am additionally
wondering why they are not being summarily dismissed from DEC. It seems as
though I've read plenty of areas in PP&P which discuss the importance of DEC
employees having a positive image in the community. DEC employees who have
allowed, by negligence, the improprieties on the part of the past president
which have been disclosed, which will likely result in the loss of real money
and benefits to other DEC employees, seem to not project a particularly positive
image to me.

-Jack

Does anybody know if the board of directors get paid?

Would that be over, or under, the table, Paul?

:^)

-Jack

RE: .-1

Thanks for saying it for me.  You have to wonder when you see something
like this happen.  I have a feeling they feel vindicated because they fired
the president.  Too bad elections were not planned in the next month or two!

	- mark

re: .44

>I am wondering why the long term DCU BoD members, many (all?) of whom are
>Digital employees, are not resigning from the BoD in shame for having allowed
>such improprieties to take place under their tenure.

I tend to agree with you here.

>I am additionally
>wondering why they are not being summarily dismissed from DEC. It seems as

What an employee does outside of his job should have NO effect upon his
employment status, UNLESS it causes the employee to be unable to perform his
job or is a violation of his employee agreement.

Bob

re: .48, Bob

I believe that PP&P speaks in several places about DEC employees setting a
good example outside of the workplace as members of the community, and
additionally adresses the aspects of involvement in criminal activities.

I feel that DEC employees involved in the direction of a member-owned credit
union which manages the assets owned by many Digital employees should act
responsibly not only as directors of that credit union, but as employees of
DEC. If they were crooked directors of the Corner S&L that might be different,
and I doubt that it would have much direct bearing on DEC. The DCU is a
different story, since the membership being affected is largely DEC employees
and their families. I personally don't like the idea that other DEC employees
might have been responsible for financially screwing me, and hiding behind
their employment should not be accepted as a valid defense or excuse.

-Jack

My intention is not to crucify them, or to lynch them, even if it were within
my power to do so, which it is not. Additionally, as I'm not accusing them
of any particular wrongdoings, I see no libel.

But I do appear to see clear and simple negligence having taken place here.
These people were elected to these positions to oversee the proper management
of the DCU for its membership/owners. During their tenure, the appointed
president was apparently guilty of misusing DCU funds as improper investments,
etc., as has been pointed out by the article quoted in .39. My conclusion is
that these people were apparently not doing their job in properly overseeing
his activities. (Hell! They didn't even know what he'd done until months
after the fact! How "aware" do you suppose they were of his dealings?) I don't
know what to call that other than negligence. Ignorance runs a close second.

Why not give them the benefit of the doubt? Why should I? They've blown it
once too often already! They don't deserve either my trust or my patience.

Let me put it another way - In my opinion they've done a lousy job and deserve
to be ousted if they don't resign their directorships voluntarily. Am I not
entitled to express that opinion? Lord knows this conference is already full
of plenty of that. The difference is that everyone's always been ragging
on DCU and now I'm ragging on the BoD who happen to be actual DEC employees!

I don't want the DCU reorganized. I don't want a policy statement from their
spokesperson. I want the incompetent BoD _OUT_! As a member and shareholder
of the DCU I'm entitled to express that desire.

-Jack

    Re <several>:
    
    Actually, the BoD aren't (by the terms of DCU's by-laws) the people
    responsible for approving loans.  That job falls upon the "Loan
    Committee", which may or may not be composed the same people.
    
    In ANY event, it appears (but hasn't yet been legally proven) that the
    Loan Committee and/or Board of Directors were the victims of fraud. 
    They may (through their INaction) have legal liability in the matter,
    but the BoD is quite unlikely to sue itself.  We'll just have to wait
    to see how this all plays out.
    
    In the meantime, some MAJOR CHANGES are overdue at the DCU.  My
    hope is that the Board of Directors will accept responsibility for this
    GRIEVOUS lapse of control and will plan an orderly transition to a new
    (untainted) BoD in the near future.
    
    As for Digital's Personnel Policies & Procedures, �6.22 provides that
       "Any employee who steals, commits or attempts to commit fraud or
    	theft against the Company or another employee will be terminated
    	immediately and will not be eligible for rehire."
    
    I'll leave it to others to judge whether NONfeasance (as opposed to
    MALfeasance) qualifies as commission of fraud or theft.  I doubt that
    I'd go that far.

   I was  curious  (resulting from my .45 question) as to whether BoD was a
   paid  position  or  not.  If it's volunteer, I could see (not agree with
   however)  folks  getting  busy  and hey, it's been going just fine so no
   need to dig closely, besides, they're busy, etc.

   However, if  it's  a  *paid*  position,  I  feel  that the pay implies a
   contract  to do a job that they did not do.  If they really felt remorse
   about  breaking their contract by not acting in a competent manner, they
   could  contribute  what they've earned from DCU back to DCU because they
   haven't  been  doing  their  job.   I'd  like  to hear from some of them
   directly in this file about what's going on.

   I understand  from  the  communications  department of DCU that at least
   some  BoDs  do  indeed  read  this  file,  and  the DCU higherups do get
   excerpts  of  this  file  (with  the names removed as per DEC PP&P).  To
   whomever  does  the  forwarding  of notes to DCU, please do so with this
   note and request a direct response from DCU to be posted in this file.

   PS: The communications dept will give out the names, etc., of the BoD's.
   They  all  have  DEC dtns and mailstops; however, contacting them at DEC
   I  suspect  could  leave  you  open to charges of harrassment maybe? How
   about a friendly phone call suggesting that they read this set of notes?

re: .51

>Let me put it another way - In my opinion they've done a lousy job and deserve
>to be ousted if they don't resign their directorships voluntarily. Am I not
>entitled to express that opinion? Lord knows this conference is already full
>of plenty of that. The difference is that everyone's always been ragging
>on DCU and now I'm ragging on the BoD who happen to be actual DEC employees!

Yes, you are entitled to express your opinion.  Everyone is.  What Al and I
are saying is that we don't feel that the BOD members who are also Digital
employees should automatically lose their jobs because of the DCU mess.
You seem to feel they should.  It's all a matter of opinion.

Bob

>     In one case the board never approved the loan, yet $3 million was 
>transfered at Mangone's order to the Barnstable credit union and paid to 
>unknown parties, the suit states.

Does this imply that the other $15 Million in loans  was approved by the 
board ?  It certainly does to me but I have a distrust for newspapers getting
things correctly.   If the BOD approved the other loans, they are tainted
with the results regardless of their intent - at best they are guilty of poor
judgement.

In a situation where it has been very obvious to anyone who reads ANY newspaper
past the Weekly Reader that real estate in general has been in a severe slump
in the N.E. and anyone who reads a N.E. newspaper had to be aware that the 
Cape was in serious trouble as well.  

Putting that percentage of deposits in any single speculative deal also is 
something that I, as a member, would not approve and I would question.

Does not the BOD have a fiduciary responsibility to the members of the DCU and 
if so why are they not named in the suit since they approved the loans ?

Did the employee who transferred the $3 Mill at the direction of the 
President of the DCU violate any rules.  Seems strange to me that ANY single
employee could move that much money by themselves and that this should be 
stopped immediately.  If the employee violated any rules, have they been 
terminated ?

Why did the auditors not catch these things ?  I think that auditors have been
charged in some Bank Failures with failure to disclose the actual condition of
the institution,

RE: .44 (et. al.), " -< Note the silence from the BoD >- "

>Likewise, I'm not necessarily waiting for any official statement to
>be made by a Credit Union spokesperson.

In case the author is including this notes conference in the general
reference of "any official statement", the following information is
offered. This reply is intended to inform the noter-ship and not make
judgements or comments on the topic of 240.0, "DCU prez involved with
failed Cape credit union".

DCU does not have direct access to this conference. Interested noters
are invited to see note 2 of this conference and its replies as to the
nature of note extractions to and "official" responses from DCU. The
steps cause an inherent delay of a few days to a week or two.

Hope this was helpful,

Carl
Extractor and not the moderator!

	An  interesting question here that I don't believe has been asked
	is:  What exactly does the DCU charter (I'm  assuming  here  that
	it's  some  sort  of  legal  Corporation)  say with regard to the
	business purpose of the credit union?  If  their  stated  purpose
	for  being  in  business is something along the lines of "provide
	financial services with competitive rates to Digital  employees,"
	then we've all got reason to be pretty upset.

	From my point of view, DCU is here to  serve  it's  shareholders.
	That  means  that  they  should  be  making  quality loans TO ITS
	MEMBERS.  Participation loans, from what I've been able  to  see,
	are  highly  speculative  instruments.   I fail to see how taking
	such risks with shareholder funds would serve the membership.

	If, due to the state of the economy, DCU were taking a $10MM bath
	on home mortgages held by  shareholders  in  DCU,  then  I  could
	be more understanding.  But a $10MM bath on high-risk paper while
	interest rates  on  saving  instruments  are  uncompetitive,  and
	credit costs are high is inexcusable.

	I'm  not of the lynch mob mentality yet, but I do find it hard to
	believe that this stuff  allegedly  went  on  without  the  board
	really understanding.

	What  to do?  I'd like to see a policy statement from DCU stating
	that they will no longer be involved in making certain  types  of
	loans.   I  understand  that DCU needs to invest its holdings and
	keeps deposits working to generate revenue, but I'd like  to  see
	commitments  to  making  only  high-quality  investments  in less
	speculative areas.  If DCU won't do this, then I  see  no  choice
	than to take my money somewhere else.

	What  are  *your*  feelings?   Should  a  bunch  of us "concerned
	shareholders" write to the board, or show up at a meeting and air
	our requests?

	Also,  what is the status of financial information from DCU?  I'd
	like to be  able  to  review  information  regarding  their  loan
	portfolio,  holdings,  assets,  etc.   It  would  be  interesting
	reading.  Those itty-bitty  reports  they  send  us  periodically
	aren't really helpful.

	/Chris

    
    Let's face it.  DCU has always been an informational vacuum.  They
    regergitate content-free responses here to try and sooth the peasants
    (shareholders) that have real questions.  To expect anything more from
    them on this matter is unrealistic in my opinion.
    
    As for actions or solutions, the resignation and/or dismissal of DCU
    officers and BoD should be a start.  An investigation should be
    conducted to determine who, if anybody, else may have been involved in
    this or helped cover it up.  The current independent auditor should be
    fired and a new firm brought in to perform a thorough and accurate
    audit of the current condition of DCU.  Obviously, additional controls
    must be introduced to prevent this type of activity in the future.
    
    And DCU MUST start sending out detailed annual reports to all of it's
    members!!!  One copy in Maynard is pure B.S.  If they can spend money
    on monthly fillers in our checking statements, they can afford sending
    us real information on the condition of OUR credit union.  I would
    expect to see a statement of how DCU money is distributed to certain
    classes of loans.
    
    A major problem appears to be this "Loan Committee".  Who are they? 
    When and where do they meet?  Who do they report to?  Let me guess, the
    Prez!  What are their criteria for loans?  Are ANY loans off limits? 
    Are there any special requirements for loans to certain people?
    (officers?  directors?)
    
    This whole thing smells very much like the RI bank president that
    took off with x millions of dollars and in the process dang near brought
    down the RI system.  Is the whereabouts of Mr. Mangone known?  Are
    federal investigators involved?  Or will we see Mr. Mangone on a 60
    minutes interview in a few months claiming it was all an honest
    mistake as he sips his Mai Tai while sunning on a yacht in the Bahamas?
    
    How can so many people be asleep at the helm?  Incredible
    incompetetence or negligence.  I guess we'll have to wait and see which
    one.
    

    All you folks shouting for blood, just remember this the next time the
    ballots come around for the Board of Directors election!  The
    incumbents have been returned time and time again, mostly because of
    apathy, I guess.  Consider running yourself, or working for one of the
    non-incumbent candidates.  Setting up a table in the cafe with a sign
    and some handouts could work wonders for letting the silent majority
    know that there is an election and it does matter who wins.
    
    The DCU does seem to be taking the right steps now (perhaps too late);
    but the things that went on would seem to call for a new auditor and a
    complete audit.  How in the heck did Mangone get $3M transferred out of
    the credit union without being detected?  Seems that someone should
    have noticed that the loan hadn't been approved.
    
    Tim

   I just  spoke  to  Mary Madden at 223-6735x207 (the communications dept)
   dept) and she said:

   1) BoD is not a paid position.  It's volunteer.  [My comment: I guess we
   get what we pay for.]

   2) I  asked  about  the  suit against Mangone.  DCU is suing Mangone for
   $10M.   However,  in  my opinion, folks like that are sometimes known to
   dash  for  the boarder, making it hard to prosecute, so I asked is he in
   custody?  Out  on  bail? Skipped the country? She wouldn't say much, but
   went  away,  called  me back later, and said that they believe that he's
   "accessible" and they believe they can recover the money.

   3) Another audit is currently being started by a different auditor.  She
   would  not  tell  me the name (I doubt I'd recognize it anyway) but it's
   "one  of  the  big  six".   DCU  will  publish the results when they are
   complete - she wouldn't tell me when.

   4) They  are planning to send out a mailing to the members on the status
   of the debacle.

   5) The  loans  in  question  were  approved  by  federal regulators, the
   auditor,  and two board of directors (I assume she was talking about the
   $3M  loan  which  was  reported  to have been transfered on the basis of
   Mangone's say alone - I guess the report may have been inaccurate).

    Re .59:
    
>   All you folks shouting for blood, just remember this the next time the
>   ballots come around for the Board of Directors election!  The
>   incumbents have been returned time and time again, mostly because of
>   apathy, I guess.  Consider running yourself, or working for one of the
>   non-incumbent candidates.  Setting up a table in the cafe with a sign
>   and some handouts could work wonders for letting the silent majority
>   know that there is an election and it does matter who wins.
    
    This is MUCH easier said than done!  (Ask anyone who has tried.)  The
    DCU election process is seriously tilted in favor of incumbancy.  A
    nominating committee selects all the "real" candidates (guess who?),
    and the only alternative (nominations are NOT accepted from the floor
    at the annual meeting) is to obtain signatures from more than 1% of the
    TOTAL membership (including dependents) on nomination petitions that
    are due to DCU 40 days before the meeting.  Ballots are mailed to all
    eligible members at least 30 days before the meeting.
    
    The printed ballot segregates the nominating committee's "slate" from
    the candidates by petition.  Most people tend to write off the latter
    group as "cranks", placing infinite faith in the nominating committee
    to have made the right choices in the first place.

re: .61

Bill,

   Do you think that there may be some method of getting a grass roots
directorship in place then, or that we'll be saddled with these clowns
forever if they don't voluntarily step down?

-Jack

re .62

THis assumes that a "Grass Roots" directorship would be any more competent...

q

Timing could be perfect if the elections were 2-3 months away.

    (1)  There is not now, nor has there ever been, nor is foreseen any
    shortage of corrupt men and women in the Commonwealth of Massachusetts.  
    It also APPEARS from the ALLEGATIONS that internal controls at DCU were
    not sufficient to prevent what APPEARS to have happened (based on
    generally circulated media reports, and we all know how accurate those
    are).  Of these points I will not argue. 

    (2)  The concept of presumption of innocence seems to be foreign to
    some of the authors of the previous notes on this topic.  Whomsoever
    may be the defendant in civil or criminal proceedings in this matter
    has/have never been adjudicated guilty of anything.  It would serve
    you well to bear that in mind, regardless of eventual findings of that
    nature, considering the public nature of your utterances.

    (3)  I expect that I will be roundly assaulted for posting this note. 
    One needn't reply; I will not dignify it with a debate, online or off. 
    The fact is that I hope I never become so complacent about people's
    legal rights and their reputations that I fail to object to the type of
    assault that the DCU BOD is being subjected to --- suggestions ranging
    from discharge from DCU to discharge from DEC, and implications of
    worse.  I do not judge the moral character of anyone who will not
    distinguish allegation from fact to be of higher caliber than the
    common thief. 

    If and when justice is served you may then, in my opinion, feel free to
    celebrate that rare and joyous event. 

    I hope that further replies will show some restraint, at the peril of
    having this very conference restricted in some way. 

    Have a nice day.  
    \Gary 

    
    RE: .65
    
    And then some people are just too naive (or something else) to know 
    when their pocket has been picked of $18,000,000.  We are merely trying
    to get some facts concerning the fate of OUR money from an institution
    that doesn't seem to have the proper controls in place to safe guard
    it.  The Officers of DCU and the BoD, being at the top of the chain of
    command, must be held responsible.  Can you say "The Buck Stops Here."?
    
    I'd also like to point out that there are probably more crooks walking
    the streets that have beat the judicial system than are behind bars. 
    Your assumption that an innocent finding means the person didn't do
    anything wrong is incorrect. 
    
    While I disagree with the dismissal of BoD members from Digital, I
    certainly feel that they should resign.  The dismissal of DSCU
    employees that were involved should follow a throrough investigation.
    But in this society, it's always somebody elses fault.  Personal 
    responsibility does not exist anymore.  We could all learn something 
    from the Japanese in this area.
    
    Now, does ANYBODY know anything about this "Loan Committee"???
    
    

re: .63, Peter

Well, we probably wouldn't be much worse off! :^)

re: .65. Gary

Certainly we could all sit here in silence. And watch it happen all over
again. You're damn right there's some "noise" here! Maybe enough to get these
people _OUT_!

If it'll make anyone feel more comfortable, I'll rescind my suggestion that
they lose their DEC positions. As I said, I'm in no position to be in any
way instrumental along those lines anyway. (In actuality it wasn't really
a suggestion at all. It was more along the lines of a concern that it wasn't
happening. I think the two are different.) But let me ask you a question -
Would _you_ want to work for/with any of these people when their apparent
negligence has cost you real money?

As far as wanting them out of their BoD seats goes, to the best of my
knowledge I didn't wake up in a different country this AM (or even in
Massachusetts, for that matter :^) ), I I believe I still have every right
to suggeest their removal, as they hold elected positions in an institution
of which I happen to be a part-owner.

Sorry - I don't believe any purpose will be served by keeping quiet, other
than possibly allowing them an opportunity to smooth things over.

.67, Rick

Thanks for the suggestions from your experience. I'd just add that it's most
probably _not_ appropriate to use DEC computer resources for the mail or
posting of notes that was recommended.

-Jack

>   2) I  asked  about  the  suit against Mangone.  DCU is suing Mangone for
>   $10M.   However,  in  my opinion, folks like that are sometimes known to
>   dash  for  the boarder, making it hard to prosecute, so I asked is he in
>   custody?  Out  on  bail? Skipped the country? She wouldn't say much, but
>   went  away,  called  me back later, and said that they believe that he's
>   "accessible" and they believe they can recover the money.
        
        Mr. Mangone was bonded. Even if he disappears, DCU can recover
        losses from the bonding company. 
        
        Still, I'd like to know where he is, and if he could loan me
        several million $$$. DCU wouldn't even loan me a dime to build my
        new house 2 years ago, yet they loan $18 mil to folks who aren't
        even members. DCU members living in the wrong state are still
        treated as third class members. I guess we get paid with the wrong
        color of money out here in the field.

    ref .69,  I know the feeling I wonder if the same amount of hassle
    was extened to the ex pres, as I received when I tried to obtain
    a second mortgage last year. In fact I went elsewhere only to get
    a lower rate, and speedy service. It makes me ill to see this
    happen, as members we ought to begin to put pressure on the 
    management,and BOD.
    

    	We all have a price where we will sell our souls. For some it is
    extremely high. For others it is a few bucks. If you don't agree with
    this statement then I ask you what you would have done if you were
    Sophie in the book "Sophie's Choice". The German SS officer ask her which
    of her 2 young children should she keep and which one would go the the
    death camp. If she did not choose one then both would die. She had to
    sell her soul in order to save the life of one child. What would you
    do? Now that we established that souls are for sale I will continue.

    	Most theft in retail stores are from the help not from shop
    lifters. Most theft from banks are from employees and not from bank
    robbers.

    	Some people are overwhelmed by having a lot of money pass through
    their hands and are willing to steal that money. Some are even willing
    to go to jail because they know that they may be able to hide the money
    in such a way that their children may be able to create a dynasty with
    the ill gotten gains. The IRS and other agencies are making this more
    difficult now but I am sure that if I wanted to start a dynasty I could
    somehow stash the money away for a few generations so that my
    grandchildren or even my great grandchildren would be billionaires
    assuming that I ever had access to billions :*) and that was the price
    that I would sell my soul for.

    	Some people do not believe in souls so the price issue is mute to
    them. Common decency prevents some of those people from stealing. For
    others, they have to be watched by government agencies. Since our
    government deregulated things like banks and then insured banks against
    thefts by employees it was almost riskless to steal from banks.

    	We do not have to vote for a new BoD. We have to vote for a new
    government who will regulate what has to be regulated and insure what
    has to be insured and never the twain shall meet again.

    	With less then 50% of the US public voting for our government it
    appears to me that they got what they deserved.

    				Arnie

                  I N T E R O F F I C E   M E M O R A N D U M

                                        Date:     20-Jun-1991 05:01pm CDT
                                        From:     Bob Kaplow
                                                  KAPLOW.BOB
                                        Dept:     SWS
                                        Tel No:   DTN 474-5416

TO: See Below

Subject: DCU scandal

        I am a long time DCU member who is concerned about what I have
    been reading regarding the actions of the former DCU president,
    Richard Mangone. I commend you for removing him from office, but I
    do not understand how he was allowed to have carried on so far as to
    squander $18 million of our funds. 

        Over the past several years, I have watched as the DCU has
    become less attractive to its members. Whatever services are needed,
    they are now available elsewhere at better rates than from the DCU.
    Perhaps this is a result of the DCU serving its own interests,
    rather than the best interests of its members. I have already cast
    my vote, two years ago I removed over 90% of my funds from the DCU. 

        You, the board of directors of the DCU, must be held accountable
    for this situation. Failure to honestly communicate these problems
    has let to the re-election of the incumbents in the last election. I
    think it is time for the entire DCU board of directors to resign,
    declare new elections to be held at the first opportunity, and to
    bring new blood into managing the DCU. After sorting out the current
    mess, the new board should modify the DCU charter to restrict the
    number of terms that a director may serve. 

        Digital Equipment Corporation is MY company too. I feel that the
    DCU is abusing the good name of that company. Digital would not be
    what it is today if it had treated its customers the way DCU has
    treated its customers over the past few years. 

        Please feel free to respond publicly to this memo. I will be
    posting it in the DCU VAXnotes conference which can be found in
    BEIRUT::DCU. The readers of that conference would welcome the input
    directly from the board of directors. 


Distribution:
 
TO:  Remote Addressee                     ( DAN INFANTE @MSO )
TO:  Remote Addressee                     ( JEFFRY GIBSON @MLO )
TO:  Remote Addressee                     ( CHARLENE O'BRIEN @PKO )
TO:  Remote Addressee                     ( MARK STEINKRAUSS @MLO )
TO:  Remote Addressee                     ( SUSAN SHAPIRO @MRO )
TO:  Remote Addressee                     ( JACK RUGHEIMER@MSO )
TO:  Remote Addressee                     ( ABBOTT WEISS @MKO )
 
CC:  DCU.NOTE                             ( PAPER MAIL )

    From this morning's Boston Globe, reprinted without permission.
    
    
               EX-CREDIT UNION OFFICERS CHARGED
    
    Four former officers of a Hyannis credit that was seized by the
    government have been named in a federal suit accusing them of 
    defrauding the institution of $47 million. The accusations against
    the former officials of the Barnstable Community Federal Credit Union
    were made in a suit filed in federal court in Boston. The National
    Credit Union Administration said that the four used false loan
    documentation and stand-in borrowers to defraud the credit union. 
    Accused were: Michael D. O'Neil, former chairman of the credit union;
    James K. Smith, former vice-chairman, Robert Cohen, former general 
    council; and Richard D. Mangone, a former officer.

Re: .69

>    Mr. Mangone was bonded. Even if he disappears, DCU can recover
>    losses from the bonding company. 


As I understand bonding, it applies only to outright theft. The loans
that were granted and approved through the appropriate channels 
and were arm's length transactions would
not be covered.  These would be considered just bad non-performing
loans.


Gim

         I got the bonding info directly from Mary Madden. From the
        information I've seen so far, theft and fraud have not been ruled
        out. See .73.

        This morning I recieved a phone call from Mark Steinkrauss,
        Chairman of the DCU board, in response to yesterday's memo. I have
        summarized my notes from that conversation, and I will post them
        here as soon as I give Mark a chance to correct any transcription
        errors on my part.

From the Thursday, 20-JUN-1991 Middlesex News (reprinted without
permission).  This one gives a little more info than reply 240.73.

4 former credit union officers accused of fraud

ASSOCIATED PRESS

BOSTON -- Four former officers of a Hyannis credit union that was taken
over by federal regulators this year have been accused of defrauding it of
$47 million during the last eight years.

The accusations against the former officals of the Barnstable Community
Federal Credit Union were made in a suit filed Tuesday in federal court in
Boston.

The National Credit Union Administration said the four used false loan
documentation and stand-in borrowers to defraud the credit union.

The suit asked that the assets of the four men be frozen and a trustee
appointed for the assets until the suit is resolved.

Accused in the suit, according to the NCUA were: Michael D. O'Neil, former
chairman of the credit union; James K. Smith, former vice chairman; Robert
Cohen, former general counsel; and Richard D. Mangone, a former officer.

The NCUA seized the credit union March 21 after it said an annual audit
showed "substantive illegal disbursements," poor commercial real estate
loan policies and "excess concentrations of credit to a select number of
members".

The federally chartered credit union has $61 million in assets.  It was
chartered in 1982 and had more than 11,000 members when it was seized.
Membership is down to 3,700, the NCUA said Wednesday.

        [I have edited this note and reposted it, incorporating the
        changes Mr. Steinkrauss sent me, but somehow All-In-1 failed to
        deliver until now. - RGK]
        
        Mark Steinkrauss, on behalf of the BoD, promptly replied to my
        memo in a  phone call around 11:00 am EDT on Friday, June 21st. 

        We discussed several issues not related to the current problem,
        regarding my impression of the level of DCU service that my memo
        also touched on. Since these rapidly got off the topic at hand, I
        will not go into detail on them. 

        Regarding the situation involving Richard Mangone, Mark stated
        that this was a very complex fraud that involved many alleged
        accomplices (bankers, attorneys, real estate appraisers, etc.) and
        went undetected for several years.  For example, federal
        regulators had examined  these loans over four annual
        examinations.  The DCU Board of Directors, its auditors, and the
        NCUA were all unaware of what was happening. These participation
        loans go as far back as 1985, and were performing well thru the
        end of 1990. DCU participated in these loans, even though they
        presented above average risk, because they also presented above
        average returns.  The loans are secured by real estate. 

        The DCU has retained Bingham, Dana, & Gould, a major Boston law
        firm specializing in finance [and employing my sister-in-law -
        RGK] to handle the case against Mr. Mangone et. al. on behalf of
        the DCU. They are attaching Mr. Mangone's private assets. Mr.
        Mangone was bonded by CUMIS, and they should be liable for some of
        any losses from DCU. DCU has hired an outside appraiserS to
        re-appraise the 12 properties in question. Mark commented that he
        Has seen most of them in person, that they do exist, and they
        represent real value. They may have been overvalued by fraudulent
        appraisals, but they are far from worthless. These will be sold as
        circumstances permit. Due to the  pending litigation, Mark could
        not go into some details. 

        As far as the BOD is concerned, Mark commented that these 7 people
        serve as volunteers, with no reimbursement for their efforts.
        Their monthly meetings do not begin until after work, and now go
        on for at least 5-6 hours. In addition, they all spend much
        additional personal time doing DCU business. As a result of these
        current problems, this workload has increased significantly. While
        Mark did agree that ultimately the BOD is responsible for what
        happens within the DCU. He also stated that this is NOT the time
        for the BOD to consider resigning. Right now, the DCU staff needs
        them to direct the resolution of this problem. 

        DCU has taken many steps to control its own costs. DCU employees
        are currently under a salary freeze. Some DCU employees have been
        let go due to cutbacks at the DCU. Clair Beaudoin is now managing
        the operations of the DCU until there is a permanent replacement
        for Mr. Mangone. This is a difficult time for the whole banking
        industry, due to economic conditions.  At DCU, loan demand is
        down, loan  delinquencies are up and personal bankruptcies are on
        the rise.  in many  ways, dcu mirrors the challenging times our
        corporation is facing. 

        Mark was quite clear that the DCU is still very solid,
        conservatively managed and invested, and has sufficient reserves
        to handle this situation. DCU serves 89000 members across the
        country. [that makes about an 11% voter response in the last
        election - RGK] 

> He also stated that this is NOT the time for the BOD to consider resigning.

Now, why does this not surprise me?

They will, of course, consider it at some future time, right? Yeah. When
hell freezes over.

-Jack

>        for Mr. Mangone. This is a difficult time for the whole banking
>        industry, due to economic conditions.  At DCU, loan demand is
>        down, loan  delinquencies are up and personal bankruptcies are on
>        the rise.  in many  ways, dcu mirrors the challenging times our
>        corporation is facing. 

Yep. Times are tough.  It doesn't seem to keep other financial institutions
from offering competative services and rates.  I'm not surprised loan demand
is down, considering the hassle I went through the last time I tried to get
a car loan from DCU.  You can be sure I won't even bother next time.

Bob

re .81:

Other financial institutions offer competitive rates and terms, but what's
"competitive" now isn't what "competitive" was a year or two ago.  The spread
between loan rates and savings rates is up, fees are up, and service is
down throughout the industry.

re .812

>Other financial institutions offer competitive rates and terms, but what's
>"competitive" now isn't what "competitive" was a year or two ago.  The spread
>between loan rates and savings rates is up, fees are up, and service is
>down throughout the industry.

USAA is an example that is commonly talked about every now and then, in this
file.  It had better rates 2 years ago, fees are not up and has some of the
best service around.  The credit card rate is 13.75.  It went DOWN recently
,as compared to DCU's going up...

I have a credit card from Citicorp that has cheaper rates then what DCU has!

Granite State Credit Union(in NH) has had better rates on credit cards and
interest.  Service has been excellent.

They are starting to lose my buisness.  The latest problems just convinced me
that even though only 'less than 5%' of money (not sure if it is reserve or
total funds) was lost, DCU has lost the competetive edge.  It has forgotten
about where it came from and why it is around.

	- mark

    This is an official response by Mary Madden of the DCU. The response,
    dated 9-JUL-1991, applies to this note topic and is included below.
    See note 2.22 for more information.

    Your comments on this response should be posted here or directed to
    to DCU directly at Mary Madden's number (dtn) 223-6735 x207.

    Carl Leeber
******************************************************************************
      Response [Extractor's Note: General response to note topic 240.]
      The following is a copy of a June statement insert sent to 88,000 DCU 
      members.  If members have further questions, please call Mary Madden at 
      DTN/223-6735, X207 OR 508/493-6735, X207:
      

      01 July 1991
      
      Dear Member,
      
      To continue communications begun at the Digital Employees' Federal Credit 
      Union Annual Meeting, the Board of Directors wants to keep you updated on 
      the situation involving DCU's former president, Richard Mangone.  Since a 
      number of members have asked questions on this topic, we have used a 
      question and answer format to respond to your inquiries:
      
      Q. Was Richard Mangone terminated from his position as DCU president?
      A. Yes.  As we noted in a prior communication to you, our Board of 
      Directors voted unanimously to remove Richard Mangone from his position as 
      DCU president and terminated his employment with DCU, effective 
      April 5, 1991.
      
      Q. Why was he removed as president?
      A. Richard Mangone was removed because he brought participation loans to 
      the credit union that are not performing.  These participation loans were 
      with Barnstable Community Federal Credit <Union (BCCU).  Over the past six 
      years, DCU took various positions, which ranged from fifty to ninety 
      percent, in these participation loans.
      
      Q. How much of DCU's loan portfolio is in participation loans?
      A. The total amount of the participation loan portfolio, which is secured 
      by buildings and real estate, is approximately $18 million.  This 
      represents 6.4% of our total loan portfolio of $280 million.
      
      Q. Was Richard Mangone the only individual who reviewed these loans?
      A. No. The participation loans were reviewed in various levels of detail 
      by two credit union boards, independent auditors and federal regulators on 
      an ongoing basis since 1985.
      
      Q. There have been recent media reports about the DCU filing a lawsuit 
      against Richard Mangone.  Is this true?
      A. Yes, this is true.  On May 23, 1991, DCU initiated a lawsuit against 
      Richard Mangone.  This action seeks to recover losses DCU may have 
      incurred as a result of Richard Mangone's actions while serving as 
      president of DCU.
      
      In addition, the National Credit Union Administration (NCUA) has commenced 
      a civil lawsuit against Richard Mangone and others with respect to these 
      participation loans and other loans at Barnstable Credit Union.
      
      Q. How much in losses will DCU incur?
      A. The amount of losses at present has not been determined.  Legal counsel 
      is investigating the matter.  New appraisals are underway to determine 
      current market value.  This will help us ascertain the residual value of 
      these loans.  Reserves have been established to cover losses and will be 
      adjusted as circumstances warrant.  Furthermore, it is likely that DCU 
      will be able to collect insurance funds from our CUMIS (Credit Union 
      Mutual Insurance Society) fidelity bond to partially offset losses.
      
      Q. What additional internal controls has DCU put in place so that this 
      will not happen again?
      A. The senior management staff and Board of Directors are taking steps to 
      ensure the proper internal controls are in place.  We are reviewing the 
      current internal control system to determine whether changes should be 
      made.  Additionally, DCU is not involved in any additional participation 
      lending at present.
      
      Q. Is the NCUA investigating DCU?
      A. No.  DCU had its regular examination in January, 1991, by the NCUA.  
      Their recommendations have been or are in the process of being 
      implemented.
      
      Q. Is DCU safe and sound as a financial institution?
      A. Yes. DCU is safe and sound.  Upon request, members may receive copies 
      of our annual report and statement of conditions by visiting our branch 
      offices or calling our Member Service Center.
      
      Q. When will there be a new president?
      A. The Board of Directors has established a search committee to spearhead 
      the process of finding new leadership for DCU.  Considerable progress has 
      been made to date.
      
      Q. Will the membership be updated regarding the pending litigation, the 
      status of the participation loan portfolio and other matters?
      A. Yes. The Board will continue to update the membership on the status of 
      all issues of importance.  To accomplish this in a cost-effective manner, 
      what with 88,000 members, we will try to do so via monthly or quarterly 
      statements.
      
      Q. Will Digital's workforce reduction impact our institution?
      A. Somewhat so.  As employees, who are DCU members, leave Digital, their 
      personal finances change and this may have an impact on DCU.  At DCU, and 
      throughout much of the banking industry, the slowdown in worldwide 
      economies has resulted in reduced loan demand, and a rise in loan 
      delinquencies and personal bankruptcy.  At all times, and particularly 
      now, your Board is monitoring all aspects of our institution to maintain a 
      high level of financial service and stability.
      
      
      On behalf of the Board and DCU staff, I want to reassure you that DCU is 
      a financially sound banking institution.  We remain committed to providing 
      you with the highest quality products and services.
      
      Thank you for you continued support.
      
      Best regards,
      
      Mark A. Steinkrauss
      Chairman of the Board of Directors
******************************************************************************

    
.79>    Regarding the situation involving Richard Mangone, Mark stated
.79>    that this was a very complex fraud that involved many alleged
.79>    accomplices (bankers, attorneys, real estate appraisers, etc.) and
.79>    went undetected for several years.  For example, federal
.79>    regulators had examined  these loans over four annual
.79>    examinations.  The DCU Board of Directors, its auditors, and the
.79>    NCUA were all unaware of what was happening. These participation
.79>    loans go as far back as 1985, and were performing well thru the
.79>    end of 1990. DCU participated in these loans, even though they
.79>    presented above average risk, because they also presented above
.79>    average returns.  The loans are secured by real estate. 

    Are the many alleged accomplices of this alleged fraud being pursued
    also?  All of these people would have allegedly benefitted financially
    by their alleged involvement in this alleged fraud.  I'm sure there are
    assets that can be seized here also.  Hope I've covered myself against
    any possible libel suits. ;-)
    
.79>    any losses from DCU. DCU has hired an outside appraiserS to
.79>    re-appraise the 12 properties in question. Mark commented that he
.79>    Has seen most of them in person, that they do exist, and they
.79>    represent real value. They may have been overvalued by fraudulent
.79>    appraisals, but they are far from worthless. 
    
    Well, thank God they exist!  I'm feeling 1% better.  But what are they
    WORTH?  5 cents on the dollar or 50 cents on the dollar?  Seems if
    these properties were over-valued due to "fraudulaent appraisals" then
    there is a clear case to be built against the people or companies
    involved with those appraisals.
    
.79>    happens within the DCU. He also stated that this is NOT the time
.79>    for the BOD to consider resigning. Right now, the DCU staff needs
.79>    them to direct the resolution of this problem. 

    Please let us know when the proper time to consider it is.  We will
    remind you all on that date.  By the way, when is the next BOD
    election???
    
.79>    for Mr. Mangone. This is a difficult time for the whole banking
.79>    industry, due to economic conditions.  At DCU, loan demand is
.79>    down, loan  delinquencies are up and personal bankruptcies are on
.79>    the rise.  in many  ways, dcu mirrors the challenging times our
.79>    corporation is facing.
    
    And this whole fiasco is just the icing on the cake I suppose.  Many of
    the banking and S&L problems are NOT due to economic conditions but to
    mismanagement.  Hell, anybody with an IQ greater than 50 can manage
    a business and make money in good times.  Only the qualified can do it in
    uncertain conditions.  
    
    As for loan demand being down, that's because DCU isn't competitive in 
    the loan market.  Give your members decent rates and see what loan 
    demand does.  As for loan delinquencies being up, I agree.  They are up
    at least $18 million!  Hmmm, could these large bad loans be skewing the
    numbers?  As for personal bankruptcies being on the rise, how much are
    these small potatoes costing DCU?  Aren't their loans secured by cars
    and homes?  The only unsecured credit offered by DCU is lines of credit
    and credit cards I believe.  Maybe time to review these on a case by
    case basis when credit limits are hit.

.79>    Mark was quite clear that the DCU is still very solid,
.79>    conservatively managed and invested, and has sufficient reserves
.79>    to handle this situation. 
    
    Conservatively managed and invested does not jive with engaging in
    speculative real estate loans.  Just what are the DCU investment
    policies?  What is off limits and what is permitted?
    
    Let's be clear here.  "Sufficient reserves" is a euphomism
    for OUR MONEY.  $18,000,000 left DCU in loans.  If $5,000,000 is
    returned then WE have lost $13,000,000 that should have been returned
    as dividends or used to reduced loan rates to members.
    
.84>    Q. Why was he removed as president?
.84>    A. Richard Mangone was removed because he brought participation loans to 
.84>    the credit union that are not performing.  These participation loans were 
.84>    with Barnstable Community Federal Credit <Union (BCCU).  Over the past six 
.84>    years, DCU took various positions, which ranged from fifty to ninety 
.84>    percent, in these participation loans.
    
.84>    Was Richard Mangone the only individual who reviewed these loans?
.84>    A. No. The participation loans were reviewed in various levels of detail 
.84>    by two credit union boards, independent auditors and federal regulators on 
.84>    an ongoing basis since 1985.
      
    If Mangone was released because these loans "are not performing" and
    the BOD (or some of it's members) reviewed and approved these loans,
    then aren't they also subject to the same penalties?  Was the BoD aware
    the Mangone was also on the BoD of the other credit union?  Did anybody
    see a possible conflict of interest here?  Who was Mangone working for
    anyways?  I guess the answer is obvious, himself.
    
    Are there other DCU officers and BoD members with similar involvement
    with other CUs and/or businesses that DCU has loaned money to?  Is
    there any obligation of DCU to disclose this involvement and the extent in
    dollar terms?
    

Does anyone know of what provisions there are in the DCU bylaws for the
membership to remove the BoD from their positions?

A pointer or posting would be appreciated.

Thanks,
-Jack

    RE: elections...
    
    I don't know if there's a way to remove BOD members other than
    by refusing to re-elect them.
    
    I know the current system is skewed against "outsiders" running for
    election.  I remember a couple of people who ran petition campaigns
    after not being "approved".  I also remeber election after election
    returning the imcumbents, even though there were "approved"
    challengers. This despite (IMO) the gradual loss of competiveness in
    the credit union, both in services and rates.  Let's hope that this
    time, people remember!  Even better would be an organized campaign to
    elect a new slate not beholden to the current DCU nor "approved" by its
    election committee.  (I better watch out before I end up voluteering
    myself!)
    
    I blame the current board for allowing the credit union to be gradually
    run down.  I blame them for becoming involved in risky participation
    loans while, at the same time, being ultra-conservative with loans to
    members. However, I can't "blame" them for not detecting the alleged
    fraud that Mangone perpetrated.  Plenty of professionals were taken in
    by this scheme, let alone unpaid volunteers.  
    
    Tim

    .79 was fun rereading.

        Over the past several weeks I've discussed the latest daily DCU
        "news" with my wife, usually over dinner. She is a member thru me,
        but since she s not a DEC employee, cannot access this conference.
        Tonight she asked me a question I could not answer. 
        
        What exactly brought the NCUA in to investigate the Barnstable
        Credit Union in the first place? Were they insolvent? Did
        something else happen to trigger the investigation. All I see here
        is that on march 20th, they came in and took over, and then filed
        charges against Mr. Mangone et. al. a couple months later.
        
        Since several DCU members have contacted the NCUA, and they have
        taken a hands off attitude, perhaps understanding what brought
        them in at Barnstable might lead us in the right direction to
        getting them in our corner here.

    
    I have a whole series of articles that document the Barnstable CU
    downfall.  I will gladly forward copies to you.
    
>        Since several DCU members have contacted the NCUA, and they have
>        taken a hands off attitude, perhaps understanding what brought
>        them in at Barnstable might lead us in the right direction to
>        getting them in our corner here.
    
    In short, insolvency or fraud.  Otherwise, seems they can't be
    bothered.  The NCUA sat down with the Cape Cod Times and went over 
    what Barnstable was doing back in 1987.  They didn't seem to think
    anything was wrong back then.  Makes you wonder a bit, doesn't it?