Conference 7.286::dcu

    
    I have called DCU and requested a copy of the DCU Annual Report and a
    copy of the Bylaws.  Sending the Annual Report was no problem.  They
    really hemmed and hawwed about the Bylaws though.  I guess there are
    several manuals.  They asked what sections I was interested in.  Not
    having ever seen them, I couldn't tell them.  From our conversation, I
    determined that there are 3 binders of NCUA bylaws and 1 DCU specific
    bylaws.  One of the NCUA binders deals with BoD elections.  I will call
    back today to determine what they are willing to send me.  I will go to
    the HQ if necessary to pick it up.
    
    One interesting comment was made by the DCU person on the other end of
    the phone.  The Bylaws (NCUA or DCU?) are recommendations which they
    don't necessarily have to follow.  Now then what are the rules we are
    playing by here if that is the case?  Does that mean we can pretty much
    change the bylaws to whatever?  Seems the rules they have implemented
    concerning BoD elections are definitely self-serving.  A write in
    candidate is put at a severe disadvantage by these "rules".
    
    We will start to take the credit union back into our hands when we know
    the rules of the game and start using them for get normal people
    running this place.  This latest fiasco will go a long way towards
    making it happen.  I will be combing the bylaws for any recall
    provisions or rules concerning special elections.
    
    We MUST organize now though.  Elections will be here before we know it.
    

    I agree, plan for removal of the board, and whatever management is 
    to be held accountable. Maybe approach other credit Unions for
    membership for Digital and scrap the DCU all together. 
    
    John 

re:  .0 - allowance for bad debts

Just my guess...

	Any  business  that  has  receivables  on  the balance sheet will
	eventuall have to "write down" some of  the  uncollectable  debt.
	The  Allowance for Bad Debt on the balance sheet is reflective of
	this type of activity.

	This may not be as sinister as you think.   Anything  they  can't
	collect  they  will have to write down.  This includes stuff like
	uncollectable  lines  of  credit,  people  who  won't  pay  their
	plastic,  etc.   Of  course, it could also include big stuff like
	bad loans too.

/Chris

Hmmmmm........

Yeah, I think Al's explanation in -1 is a lot more plausible in this
particular situation than is mine.

/chris

       There are many troubling signs about DCU and here are a few:
       1.Members Questins:Phone calls should be answered promptly and
         courtiosly with straigt and completly honest answers. Members own
         the credit union not the employees or the BOARD.
    
       2.What are the Details of the HUGE ALLOWANCE FOR BAD DEBTS on the
         balance sheet?
    
       3.Why is there a reserve fund? All earnings should be returned to
         current members that generated them. That is the credit union
         principle unless EXPRESSLY authorized by the members to the
         contrary.
    
       4.Retained Earnings should be returned to members who have generated
         them in dividends at the end of each fiscal year unless members
         determine otherwise. That is the credit union principle.
    
       5.I hope the Board members are not being payed and I hope they can
         not approve their own loans!!!
    
       6. Members should call for a FULL audit of DCU loan portfolio and
          the the findings sent to all members. This request is not a
          privilege, it is Members right and DCU can NOT say NO!
    
       Francis.
     

    
    Moderator,
    
    Could you please move this to the correct note?  Thanks.
    
    Real estate has always been speculative.  Has DCU been realistic in
    their allowance anyways?  $240K allowance for $246,000,000 in loans? 
    Are we now taking the hit all at once?  Will next years allowance be
    even higher?  (my guess is yes.)  IMO, this is the REAL reason for all 
    these fee increases and "choices" but DCU doesn't want us to know the 
    extent of the damage.  It flies in the face of their proclaimed
    investment strategy.
    
    Question DCU:  DCU loaned $15,500,000 in 148 business loans in 1990.
    Who are these to?  Are they DCU members?  Are they also risky loans? 
    Are they secured?  Why are we loaning to businesses anymways?
    
    This annual report is a REAL eye-opener!  No wonder they don't
    distribute it widely.
    
    Phil
    
    P.S.
    We also opened our 32 branch in May, 1990 in MAHATTAN to service 1,400
    employees.  Sure do hope Digital is footing the rent on that baby!

    The credit union does not make investments and cannot make loans to
    non-members. The authority to do the above can only come from the
    members and would require a change in the BYE_LAWS to give this
    authority to its board.
    
    A credit union with homogenous membership ie a common bond ie DEC
    Employees should have few losses. We can bring pressure on fellow
    employees to keep the trust. That is what a Mutual selp help Co-Op
    like a credit union is all about.
    
    If the bye-laws were not followed we demand reparation and punishment
    to protect members money. We need an audit!
    
    Francis.

re: .8

	My understanding is that DCU is  fully  able  to  make  loans  to
	non-DCU members.  
	
	Recall  the  details of the participation loans which resulted in
	Mr.  Mangone's dismissal.  If  I'm  understanding  the  situation
	correctly,  those loans were made to builders and contractors for
	Cape-area development.
	
	Further, I believe that the by-laws (not BYE-LAWS...bye-laws  are
	something  that  govern  leaving your mother-in-law's house :-) )
	are merely recommended operating  procedures,  not  hard-and-fast
	rules.   DCU  falls  under  oversite  by a governing board, but
	my understanding is that the CU's basically  regulate  themselves
	within some set of broad confines that are legislatively imposed.
	If this is true, I can't see how  it  does  any  good.   Sort  of
	reminds me of the Big Bad Wolf guarding other Big Bad Wolves.
	
	What I'm *really* curious about is who audited DCU for the annual
	report...was  it  an  inside  audit,  or  external.   If  it  was
	external, who did it?
	
/Chris

    
    RE: .9
    
    >	What I'm *really* curious about is who audited DCU for the annual
    >   report...was  it  an  inside  audit,  or  external.   If  it  was
    >   external, who did it?
    
    Peat, Marwick audits DCU.  When I asked Mary Madden why they did not
    have a statement in the 1990 Annual Report she said it was because the
    report is a condensed version.  The auditor will only put their
    statement on a full report.  I am still awaiting word as to whether we
    have access to that full report by the auditor.
    

    Re .9:
    
>   Further, I believe that the by-laws are merely recommended operating
>   procedures, not hard-and-fast rules.  DCU falls under oversite by a
>   governing board, but my understanding is that the CU's basically
>   regulate themselves within some set of broad confines that are
>   legislatively imposed.
    
    An organization like the DCU has at least three levels of control, in
    addition to applicable state and federal laws and regulations.
    1.	The CHARTER is granted by a governmental entity and outlines the
    	general conditions of operation.
    2.	The BYLAWS serve as the constitution for the organization, spelling
    	out the responsibilities and fundamental business it is in.  They
    	may be amended, but should NOT be violated.  The Board of Directors
    	is responsible for enforcement of the bylaws on behalf of the
    	membership (the actual owners).
    3.	OPERATING PROCEDURES are the responsibility of DCU management. 
    	They should implement the requirements of the charter and bylaws
    	(and the NCUA and the Commonwealth of Massachusetts ...).
                                                                 

re: -1

	I  understand what you're saying out bylaws, but if we're talking
	about the articles of incorporation and the bylaws thereto,  it's
	really easy to do whatever you want.

	I  once  served  as  a  founder  and  board member for a start-up
	corporation.  When we did our  incorporation,  our  articles  and
	bylaws  said  that  we  were  in  business  "to pursue legal, for
	profit,  business  transactions  as  approved  by  the  Board  of
	Directors."  This was essentially a blank check to do whatever we
	wanted to do, so long as it was legal  and  the  board  said  OK.
	Language  like this is often used to make it harder to pierce the
	corporate veil and sue officers directly for making bad  business
	decisions.

/Chris

re: -1

Nope, my incorporation was done in Michigan.  But, they're
using legislation modeled after the legislation used in
Deleware.  Ever see how many corporations incorporate there?

Where was DCU incorporated?  Mass, Deleware, or somewhere else?

/chris