Conference 7.286::dcu

    For those who have a copy of the financial report, is DCU a safe
    institution to stay with?  I cannot affort to have my funds frozen,
    even for a week.
    
    nate

    
    RE: .1
    
    I think you should get a copy at your local branch and decide for
    yourself.  As we have all learned from the numerous S&L closures, bank
    failures, and insurance co. bankruptcies, you have to evaluate the
    institution yourself.  Hard to do but there are some key numbers to
    look for.  But the changes from 1989 to 1990 are big.  I don't think
    anybody but the DCU Officers & BoD could possibly say DCU had a good year.
    If this was a private corporation there would be probably be firings,
    layoffs, or plant closings.  I guess DCU has the luxury of just raising
    it's price to it's customers because we are so loyal and would never 
    leave. ;-)
    
    It would be interesting to see a quarterly statement for the first two
    quarters of 1991 to see if the trend has continued.  Anybody seen any
    1991 figures?
    

    
    I have spoken with Mary Madden and received the following information:
    
    Signature gathering for getting on the ballot for BoD elections is
    restricted to the few months before the election.  The lower of 1% 
    of the membership or 500 signatures are required to get on the ballot. 
    So 500 signatures is what is required since there are approximately
    88,000 members.
    
    Each DCU branch should have copies of monthly statements of condition
    posted and available.  (I plan on getting copies of all since the last
    Annual Report.)
    
    DCU has approximately 250 employees.
    
    Peat, Marwick is the auditor.  She did not know why a statement by them
    was not part of the annual report.  She will get back on that.  I asked
    if a more detailed audit report was made and she said yes.  She will
    get back concerning access to it.
    
    Large loan loss provision was the result of NCUA recommendations based
    on many factors (institution size, loans outstanding, etc.).
    
    She didn't know what the current bad loss provision was but would get
    back to me.
    
    "Business loans" was a very broad category and includes things such as
    rental property mortgages.
    
    DCU does not loan money to non-members but did participate in loans
    with another institution for a total of $18,000,000.  She seemed to
    think there was a difference between participating in a loan to
    non-members vs. loaning directly to them.
    
    Loans to senior management and BoD can be done.  It requires BoD 
    approval.  Public disclosure of those loans is NOT required.
    
    Public disclosure of senior management salary amounts is not done.
    
    Changes to DCU Bylaws can be made but require approval of the NCUA.
    To the best of her knowledge there have never been any membership
    driven changes to the DCU Bylaws.
    
    Phil

    
    I have requested copies of all the monthly "Statement of Condition"
    statements which DCU puts out.  One should be on the wall of all
    branches.  June's statement was on the wall at the local branch here
    but they only had a May copy that I could take.
    
    A few interesting bits of info:
    
    1. It appears (if I am interpretting this column correctly) that DCU
       has already taken $1,514,724 in bad loan allowance so far this year
       (or over the last year).  The column title is "12 Month Variance".  The
       amount taken in May was $4,380.  This column (12 Month Variance) plus 
       the current allowance amount comes close to the total bad loan 
       allowance that appeared on their 1990 annual statement.  So I believe 
       I'm interpretting this correctly.
    
    2. The "12 Month Variance" in "Reserves" (equity) is $3,429,017.  It is
       down 27.2% from the prior year's $12,592,082.
    
    3. A real interesting section at the bottom is "Classification of Loans
       Outstanding".  This is the breakdown it gives:
    
    	Degree of Delinquency		#		$
    	Current				37,500		231,392,889
    	2 - 6 month			190		 11,533,859
    	6 - 12 month			35		    187,353
    	12 months and over		1		      1,523
    					------		-----------
    					37,726		243,115,624
    
    	$11,533,859 in delinquent loans is SUBSTANTIAL.  It exceeds the
    current allowance for bad loans by a considerable amount.  The amount
    held in "Reserves" by DCU appears to be barely enough to cover it, if
    it can be used for that purpose.  I'm assuming it can.  The last 2
    categories (6 - 12 months and over) is probably lost money.  If that
    $11.5 million hits 6 months delinquent, it should also be considered
    history.  There is a category named "Other Real Estate Owned" with a
    value of $5,626,427.  This is probably the real value of the property
    that makes up some of this bad debt.  If that is true, the $11.5
    million in bad debt would fall to about $6 million.  This is still
    about twice as much as the current reserve for bad debt.
    
    I will place a call to the Director of DCU Finance and Operations and
    see if my interpretations and understandings are correct.  A single
    sheet of numbers leaves a lot of interpretting (and possible error) to
    the reader.  I will report on my findings.
    

    
    After speaking with Harry Goralnick, Director of Finance & Operations,
    I have the following explanations ands corrections.
    
    1. "12 Month Variance" covers the last 12 months.
    
    2. "Allowance - Loan Losses" is added to monthly ($300K budgeted thru
       June 1991, $600K actually reserved) and losses are subtracted.
    
    3. "Loans to Members" still includes some of the non-performing
       participation loans.  When an appraisal is complete, they will be
       subtracted from "Loans to Members", the real value added to "Other
       Real Estate Owned", and the difference applied against
       "Allowance-Loan Losses" and possibly Equity (Reserves and/or
       Undivided Earnings).  Recovery of losses from Bonding was high in 
       likelyhood in his opinion.
    
    4. "Other Real Estate Owned" consists mainly of real estate from the
       non-performing participation loans.
    
    5. "Shares of Nonmembers" - These are deposits held by DCu for
       Barnstable CU.  DCU performed the processing of checks for them.  Since
       Barnstable CU has closed this amount will gradually disappear.
    
    6. Both "Reserves" & "Undivided Earnings" are available to DCU for loan
       losses.  The total of these two is $15,627,272 (May, 91), down from
       $17,095,715 (8.6%) from the previous year.
    
    7. The $11,533,859 in delinquency (2-6 month) is comprised mainly of
       the non-performing participation loans.  At some point in the future
       (soon?) this amount will be applied to "Allowance-Loan Losses" and
       Equity.  The real value of the property is yet to be determined and
       is not included in the "Other Real Estate Owned" category.
    
    
    I mentioned that I was a bit surprised by the annual report.  To read
    the statements by the Chairman of the Board, Chairman of the Credit
    Comm., and the Treasurer, one would think DCU had a good year.  Yet
    when you view the Statement of Income and see a drop of net income from
    $3,331,000 to $290,000, you would have to draw a much different
    conclusion.  This difference is due to the shifting of resources to
    cover bad loans.  And specifically, the participation loans.
    
    After reading and interpretting the 1990 DCU annual report and current
    statement of condition, I have to conclude that the direction of DCU
    lately to raise minimums and fees is a direct result of the Mangone
    case.  DCU has yet to see most of the losses hit the books.  How much
    of this will all be recovered via bonding is anybodys guess.  DCU
    currently has enough equity to survive the tremendous hit it will be
    taking.  However, it's position will be dramatically different.  I
    would imagine it's ratings may suffer.  Who knows though?  If people
    don't withdraw their money and cough up the dough, DCU will plod on. 
    But plod on to what end is the question?  And will they be any the wiser
    given the cast of characters is the same and has been the same for a
    while.
    

    I was told by Mary Madden of DCU yesterday that the Mangone case (I
    quote) "has cost DCU nothing".
    
    Question: what pay do the Board of Directors receive, or is this
    voluntary?
    
    Ray

    
    RE: .6
    
    That statement by Mary Madden is a blatant attempt to cover the 
    magnitude of this scandal IMO.
    
    I encourage, no I STRONGLY URGE, everybody who reads this conference to
    immediately go to the closest branch and get a copy of the 1990 Annual
    Report.  Call DCU HQ, and request membership services to send you if
    you cannot get one at a branch.  I have already posted the numbers
    here.  They do not lie.  When losses for bad loans go from $240K to
    over $4 million, there is a reason.  Look at the latest Statement of
    Condition posted at all DCU branches.  Check the breakdown of loan
    delinquency at the bottom.  Tell me if you see $10 million dollars that
    is between 2-6 months delinquent.
    
    Maybe she is counting on the bonding agency to cough up millions of
    dollars.  But for her to say that at this point is ridiculous IMO.  Ask
    her to explain the numbers on the Annual Report and Statement of
    Condition.
    
    I would also like to point out that NOWHERE in the statements by the
    Chairman of Board (Mark Steinkrauss), Credit Committee Chairperson and
    acting DCU President (Claire Beaudoin), and Treasurer (Susan Shapiro)
    is there ANY reference to the fact that DCU net income for 1990 was
    $290K vs. $3.3 million the year before.  If you read the text, look at
    the pretty bar chart of assets, and don't read the actual numbers, we
    would think DCU had a great year.  No problems.  Nothing out of the
    ordinary.  After reading the available statements and speaking with DCU
    financial personell, I have come to the conclusion that this glaring 
    omission of SIGNIFICANT information is unconscionable.  At the minimum
    a coverup, at the maximum incompetence.  They knew enough to move over
    $4 million to cover bad loans but didn't want to call attention to it. 
    I guess this is the level of communication we have come to expect. 
    Just standard propaganda to the unwashed by the powers that be. 
    
    People, we had all better wake up and start asking questions and DEMAND
    answers with substance.  The people running this credit union are
    starting to believe their own propaganda. 
    
    I will close with a quote from the section written by DCU Treasurer,
    Susan Shapiro in the 1990 Annual Report:
    
    "As the industry reported unprecedented losses, DCU's financial
    performance improved with Net Income for 1990, on target at .8% or $.3
    million."
    
    The claim that DCU performance improved with Net Income of $290,000 vs.
    $3,331,000 the year before is an out and out lie.  This person should
    be fired for this statement IMO.  It is no wonder there is no statement
    by the auditor on this "Annual Distort".  
    

    With the downsizing going on at DEC, I wouldn't be surprised to see a
    drop in deposits at DCU.
    
    Is the money being set aside for bad loans actually being spent to
    cover losses or is it being set aside just in case.  Personally, with
    the current economic conditions I'd much rather see them pull some
    money out of circulation (i.e. not made available for loans) and use it
    as an insurance policy against some of the outstanding loans going
    bellyup.

    
    DCU increased "Compensation and employee benefits" from 1989 to 1990.
    In 1989 it was $5,797,000.  In 1990 it was $6,780,000.
    
    Yes, it is being and was placed in an allowance for bad loans.  They
    also have Equity that can be used to supplement that allowance.  Good
    thing, they'll need it.
    

    
    I have just received word from Mary Madden that I (we, us) CANNOT have
    access to the full auditors report for DCU which contains the financial
    statements and detail on which the Annual Report brochure is based. 
    She states that there is sensitive business information which cannot be
    disclosed.  I asked her if I could have a copy which have such
    information blacked out.  She said then I would be left with what was
    in the Annual Report pamphlet.  I then asked for the auditor's
    statement.  She will get back to me.  If I can't get that I have a REAL
    problem with this.
    
    I find this particularly disturbing that we now have to rely on a very
    high level financial document to assess the financial stability of
    'our' credit union.  Anybody relying on the text included in the annual
    report is making a BIG mistake.  The numbers tell the real story and
    now we will know no more than we can glean from these very high level
    statements.
    

I hope she does get back to you, and that you're right about her really being
a sincere person just trying to do her job.  (Really.)  She didn't sound like
that on the phone.

Unfortunately, IF an institution were in real trouble because a former high
official had caused 8-digit losses, then detailed financial statements would
(correctly) have to be called "sensitive business information which cannot
be disclosed".

Whatever the financial picture, they'd do well to devote serious time and
energy to managing their public relations, and promptly.

Is this LEGAL.

Who might be able to check and see if a member/owner can be blocked access
detailed information about their OWN institution?

(I don't have a clue where to start, but I would think there would be a
"sunshine" provision in the NCUA based bylaws).

    
    RE: .12
    
    DCU has been claiming NCUA are guidelines, not laws.  I have also asked
    for access to the minutes of BoD meetings in which bylaws have been
    changed and BoD minutes without which certain sections of the bylaws
    are meaningless.
    
    Case in point, Article 9 (Credit Committee), Section 2:
    
    (11/90)  Regular terms of office for credit committee members shall be
    for periods as determined by the board and as noted in the board's
    minutes.
    
    
    Access to these minutes has been denied by DCU.
    

    
    I have just received word that I WILL be granted access to the full
    auditor's report!  A major victory in my eyes.  I am awaiting a call
    from Harry Goralnick to arrange a time to go in and go over it with
    him.
    
    Stay tuned...

    
    [Permission to forward this note to other DCU members is granted.
     Please be aware of the fact that many of the statements and
     evaluations contained in this reply are my personal statements and
     evaluations based upon my examination of DCU financial reports and
     conversations with DCU senior management.]
    
    
    I meet with Harry Goralnick, DCU Director of Finance & Operations for
    1.5 hours yesterday afternoon.  We covered many of the topics being
    discussed in this conference but my primary objective was to review the
    1990 auditors report for DCU.  The auditors report contain many notes
    which explain several of the key financial figures on the DCU
    statements.  There were are least 10 notes but the one I was primarily
    interested in was the note for loan losses.
    
    Anybody reading DCU financial statements MUST have access to these 
    notes to properly interpret some of the figures.  As a matter of fact, 
    it is the exclusion of these notes from the DCU Annual Report brochure 
    which prevents the auditors statement from appearing in the annual report.
    This is according to DCU.  And it would make sense because the notes
    are where the real information is.  I was not able to get a copy of
    this report, just read it.
    
    The report confirms suspicions we all have concerning DCU and the
    recent scandal with Mangone.  They are instituting fees to generate
    additional revenue to cover the losses already incurred and that are
    going to be incurred due to the default of $18,000,000 of participation
    loans approved by the Board of Directors.  These loans were brought to
    the Board by Mangone and according to Harry Goralnick, the Credit
    Committee had no part in their approval.
    
    In 1990, DCU took a loss of $2,696,000 on some of the participation
    loans.  In this same time period, losses by "members" was $283,000. 
    The loss by members was .0012% of loans outstanding.  The increase in
    delinquency cited by DCU so frequently of late definitely applies to
    the participation loans.  Is .0012% a high delinquency?  I would have
    to say not based on the following statement by Claire Beaudoin
    (Chairman DCU Credit Committee) in the 1989 Annual Report:  "As news of
    a troubled financial marketplace surfaced in 1989, DCU reported a
    consumer and real estate loans delinquency rate of less than 0.1%, one
    of the lowest amony all banks thrifts, and credit unions."
    
    The very next sentence is indeed ironic: "Our conservative lending
    practices, especially in real estate secured loans, have kept this rate
    in check."
    
    I would like to point out the way the previous breakdown was done by
    the auditors.  It is VERY important in my eyes.  Delinquency for 
    participation loans was reported seperately and all other delinquencies
    to "members" was accounted for.  This CLEARLY indicates that these were
    loans to non-DCU members.  These were NOT investments.  These were
    loans.  Loans which were to trust companies and which did NOT go
    through the normal loan approval process of DCU.  As loans to
    non-members, these loans violate DCU Bylaws.
    
    DCU also repossessed property totalling $6.6 million in 1990. 
    Commercial real estate totalling $2,562,000 and land totalling
    $4,131,000.  The fact that DCU loaned money for raw land is appalling. 
    This is the highest form of real estate speculation.  Many financial
    institutions require a very high degree of borrower equity in raw land
    before lending money for such purposes.  If you wish to see how strict
    they are, I suggest you call any bank and see.  DCU's Board of
    Directors loaned DCU money to non-DCU members for real estate
    speculation.  This was done at a time when almost all statements coming
    from DCU contained statements concerning the credit unions conservative
    lending practices.  But this conservative lending practice was indeed
    occurring, to you and I.  (Well, not actually me, their terms were
    never good enough to even apply.)  These participations brought to DCU
    by a member of it's senior management (Mangone) were NOT held up to the
    same scrutiny that a regular member's application would have been. 
    Merely having all the paperwork neatly filled in isn't enough.  DCU
    never VERIFIED any of the information through independent evaluations. 
    When I asked Harry about this, he stated that these evaluations were
    expensive and may cost up to $5000.  IMO, when you're dealing in millions,
    $5,000 is a good investment.  Again, DCU did NOT follow sound business
    practices IMO.
    
    The 1984 Annual Report contains the NCUA rating of DCU.  It is #1.  I
    asked Harry for the current NCUA rating of DCU and he said it was not
    for public disclosure.  He stated DCU got grief by the NCUA for disclosing
    that piece of information in the annual report.  Now why would that be? 
    As a customer who is going to deposit a life savings in a financial
    institution, I would like to have access to this rating.  Does anybody
    know where I can call to speak to somebody in the NCUA?  I know people
    in here in the past have had some dealings with them.  I feel I must
    confirm this.
    
    	Latest Satements of Condition from DCU:
    
    				Loan Losses	Delinquent Loans (2-6 months)
    				-----------	----------------
    	January			$ 30,005	$   885,339
    	February		 201,248	  7,961,018
    	March			  33,900	  8,801,520
    	April			   7,998	  9,760,978
    	May			   4,380	 11,533,859
    	June			  99,069	 10,683,797
    				-----------
    				$376,600
    
    	Current Allowance for Loan Losses is $3,264,891.  Look to see
    massive transfers from Equity to the Alloance for Loan Losses over the
    next few months.  DCU may try and spread these over this year and next
    though.  August statement is due out this week.  I can hardly wait. :-(
    
    Looking forward to seeing everybody at the BoD forum tonight.
    
    Phil
    

    
>    When I asked Harry about this, he stated that these evaluations were
>    expensive and may cost up to $5000.  IMO, when you're dealing in millions,
>    $5,000 is a good investment.

    	In my discussion with Harry on Friday he wanted me to clarify this
    statement.  The reason DCU did not perform independent evaluations was
    not due to the cost but because it normally wasn't done by a
    participating institution.  The evaluations are normally done by the
    originating institution (in this case, Barnstable CU).  DCU's BoD
    reviewed and approved the paperwork given it.

    	While this may be the case, I find it extremely trusting of our BoD
    to grant $18 million dollars in loans, to trust companys speculating in
    real estate, excuse me, INVESTING in real estate.  While not allowing
    the paid professionals at DCU (Credit Committtee) to evaluate these
    loans in the same way that is done for it's members.  Instead, the BoD
    reviewed and approved the loans.  They are NOT supposed to be loan
    officers.  While senior management at DCU "were aware of" the
    participation loans, they had no part in their review or approval.  If
    a DCU loan officer had granted loans that had turned out this way,
    there is no doubt in my mind that they would have suffered the same
    fate as Mr. Mangone.  But who fires the BoD?
    
>    The 1984 Annual Report contains the NCUA rating of DCU.  It is #1.  I
>    asked Harry for the current NCUA rating of DCU and he said it was not
>    for public disclosure.  He stated DCU got grief by the NCUA for disclosing
>    that piece of information in the annual report.  Now why would that be? 
>    As a customer who is going to deposit a life savings in a financial
>    institution, I would like to have access to this rating.  Does anybody
>    know where I can call to speak to somebody in the NCUA?  I know people
>    in here in the past have had some dealings with them.  I feel I must
>    confirm this.

    	I have called the NCUA and been told that their evaluations and
    documents are not for public disclosure.  The person I spoke to told me
    I should file a request under the Freedom of Information Act to get
    copies of whatever is available.  I intend to do this.

    	I do find this distressing.  That a federal government agency that
    we as taxpayers pay for, cannot disclose information concerning it's
    rating of the institutions which it monitors.  This means that we as 
    consumers must rely on the financial statements and documents which DCU
    issues.  *IMO*, the sterilized Annual Reports which DCU issues along with
    the rosy statements by it's Directors and officers, did not
    reflect the true condition of the institution in 1990 and where it was
    headed.  The TRUE condition could only be assertained by examining the
    full annual reports with the associated auditors notes.  The detailed
    description of what DCU has been doing over the last 5 years is all
    documented there.
    
    BUT, I could only get this information by physically going to the DCU
    headquarters and taking an afternoon of vacation time to read these
    full reports!  I was not allowed to copy them though they contained *NO*
    proprietary or sensitive information.  The only note that would even
    come close to this was a note dealing with DCU's dealings with Digital
    (equipment purchases I believe).  But I can't say for sure because that
    was the ONLY section deleted.  What they DID contain was clear
    information that may now be embarrassing to the BoD.

    Here is a summary of one of the notes dealing with the loans DCU has
    outstanding:  (in thousands)

                          1985     1986     1987     1988     1989     1990
                         ------   ------   ------   ------   ------   ------
    Automobile           32,962   51,452   44,384   39,803   34,955   33,510
    Mortgage             25,845   74,557   70,691   72,822   69,723   71,553
    Home Equity              --       --   43,338   63,441   81,203   89,457
    Other Secured         3,463    6,082    6,459    7,212    6,411    5,096
    Unsecured            15,124    9,820   15,073   21,153   35,706   39,721
    Participation loans   2,520    8,010    9,886       --       --       --
      with other CU *
    Commercial RE loans *    --       --       --   12,766   15,332    8,727

    * = Description of participation loans changed to Commercial RE loans.

    My question is "Had this information been made public over the last 5
    years, would any one of DCU's 88,000 members have questioned DCU's
    "investment" in participation loans?"

    Another auditors note in the 1990 Annual Report reads:

    " (3) Loans

    	The credit union grants home equity loans, residential loans and
    consumer loans to members.  The credit union also participates in
    commercial real estate loans primarily in the Cape Code
    region.  Approximately 67% of the loans granted by the credit unionare
    secured by real estate.  The ability and willingness of the home
    equity, single family residential and consumer borrowers to honor their
    repayment commitments is generally dependent on the level of overall
    economic activity within the borrowers geographic areas and real estate
    values.  The ability and willingness of commercial real estate borrowers 
    to honor their repayment commitments is generally dependent on the 
    health of the real estate economic environment in the borrowers 
    geographic areas and the general economy."

    Also part of the 1990 Full Auditors Report is a note which details some
    of the foreclosure info on the "investments":

    "Real Estate Acquired by Foreclosure or Substantively Repossessed
     ----------------------------------------------------------------

    Real estate acquired by foreclosure or substantively repossessed is as
    follows:

    						Dec. 31 1990
    						------------
    Land					$4,131,000
    Commercial Real Estate			 2,562,000
    						----------
    						$6,693,000

    At December 31, 1990, real estate acquired by foreclosure or
    substantively repossessed included approximately $5,668,000 of
    properties that were substantively repossessed."

    Now if DCU had $18 million in participation loans out, the above
    summary indicates that at least 1/3 of them were at least
    "substantively repossessed" by the end of 1990.  The first default of
    these participation loans was in the fall of 1990.  From looking at the
    DCU monthly statements of condition, it appears that the first one came
    on the DCU books in October (Other Assets).  So DCU management and 
    Directors knew they had a problem AT LEAST as early as "the fall" of 
    1990.  But the payments from these loans had to have stopped at least 
    a several months before that.  Didn't ANYBODY on the BoD see this freight 
    train coming???  Everybody says that they were surprised when the news 
    about Mangone broke.  They shouldn't have been!  By March or April of 1991
    they should have been aware of a DCU financial CRISIS for at least 7-8
    months.  Re-evaluations should have been occurring then to determine
    the scope of the damage.  IMO the BoD were either asleep at the 
    switch or were trying to keep this under wraps.  I say under wraps 
    because NO mention was made of this SIGNIFICANT financial impact in the 
    1990 Annual Report.  Instead, we were told:

    "Despite the challenges o f a troubled regional and national economy in
    1990, DCU continued to successful."  (Mark Steinkrauss)

    "We will continue our prudent lending and investment practices so that
    our members' investments remain safe and sound." (Mark Steinkrauss)

    "Finally, as we progress through 1991, we will continue to focus on the
    security of funds while providing our members with the best possible
    service."  (Mark Steinkrauss)

    "As the industry reported unprecented losses, DCU's financial
    performance improved with Net Income for 1990, on target at .8% or .3
    million.  We maintain a conservation cash position and invest in only
    the highest quality money-market investments."  (Susan Shapiro)

    "Most of our earnings were placed in reserves as we anticipate
    continued pressure on the real estate market, especially in New
    England."  (Susan Shapiro)

    The above statement is the ONLY statement that could even be considered
    as close to alluding to the already escalating bad participation loans.  
    And the words "New England" should have said Cape Cod.  The vast
    majority of DCU's loans to it's members were doing just fine.

    I believe that if Mangone hadn't been collared, he might have drained 
    every last dime out of DCU right from under our BoD's noses.  Given all
    this, I just cannot continue to place my trust and savings in this 
    institution as long as the current BoD is involved in its operations.
    Everyone should make their own evaluation based on the facts.  I have
    based mine on the facts.  I would welcome the BoD's response to
    *anything* I have stated in this reply.  If anything is incorrect or
    misleading, I will gladly correct it or clairfy it.
    

re:  .16

	Is  the  NCUA really a "federal government agency?"  I thought it
	was a "peer-review & governing" type organization.

	Also, you expressed a certain dismay at being unable to photocopy
	certain  documents  you  inspected  whilst  at DCU.  I don't find
	their unwillingness to cooperate unusual  when  compared  to  how
	other  banks  and  CUs  function.   I  think  they should be more
	forthcoming certainly, but they're not acting any different  than
	any other fiduciary organization.

	On  the  other  hand,  I've read the Annual Reports for dozens of
	publically and privately held organizations.  Every one of  these
	reports  was  complete,  including  the  notes  accompanying  the
	statements, and the auditor's "review and accuracy" statement.  I
	find  it surprising that the NCUA regulations, or federal banking
	legislation, or  state  banking  codes,  don't  require  complete
	disclosure of financial status to the shareholders.

/Chris

    I'm not sure one can impeach a board of directors, but the following
    slightly paraphrased relic of the Watergate impeachment proceedings
    comes to mind:
    
    What did the BoD know, and when did they know it?
    
    To which I might add:
    
    If they didn't know, why didn't they????
    

    
	RE:  .16
    
    >	Is  the  NCUA really a "federal government agency?"  I thought it
    >   was a "peer-review & governing" type organization.

    	Well, their manuals are available from the Superintendent of
    Documents in Washington D.C. and information can be obtained from them
    through the Freedom of Information Act.  These 2 facts would lead me to
    believe they are an agency of the Federal government.
    
>	Also, you expressed a certain dismay at being unable to photocopy
>	certain  documents  you  inspected  whilst  at DCU.  I don't find
>	their unwillingness to cooperate unusual  when  compared  to  how
>	other  banks  and  CUs  function.   I  think  they should be more
>	forthcoming certainly, but they're not acting any different  than
>	any other fiduciary organization.

    	Let me very clear about what I am saying here.  I originally
    requested a full copy (including auditors notes) of the DCU Annual
    Reports.  I was denied.  One day later I got a call saying that I could
    come to the DCU HQ to read and review them but could not have copies
    of them due to the confidentiality of their content (the auditor's
    notes).  My understanding is that this determination was made by Mark
    Steinkrauss.  Of course I took them up on the offer.  I have since gone 
    back and spent one afternoon reviewing the full annual reports from
    1985-1990.  The auditors notes contain NO confidentail information,
    with the possible exception of a note relating to DCU's dealings with
    Digital.  This note was the only one I was not allowed to read.  This
    is understandable.  But ALL of the other notes (10-12?) contained
    explanation or more detailed information on the financial statements. 
    Information which ANYBODY reading the financial statements SHOULD HAVE
    and MUST HAVE.
    
>	On  the  other  hand,  I've read the Annual Reports for dozens of
>	publically and privately held organizations.  Every one of  these
>	reports  was  complete,  including  the  notes  accompanying  the
>	statements, and the auditor's "review and accuracy" statement.  I
>	find  it surprising that the NCUA regulations, or federal banking
>	legislation, or  state  banking  codes,  don't  require  complete
>	disclosure of financial status to the shareholders.

    	Ditto.  I asked this same thing of the person at the NCUA but 
    	he couldn't tell me anything definite.  But I do know this.  That
    	at the bottom of each and every financial statement are the words:
    
    		"See accompanying notes to financial statements"
    
    	And I have been told that there was NO annual report published and 
    	distributed by DCU in 1985.  I have a copy of the auditors report 
    	(minus the notes of course).
    
    	In this day and age of banks, S&L's and insurance companies going
    	under, each individual must look out for himself.  This requires the
    	reading of accurate and complete financial statements.  DCU has to
    	change their policies of disclosure to make this possible.
    

    Phil,
    
    Is it correct to say that copies of the full annual reports (which are
    given away freely by the other bank I use!) are STILL not available to
    individual members?
    
    Do you feel that your being granted the right to LOOK at (but not copy)
    them was viewed as a special favor?
    
    If yes (to either question) then I plan to request copies for myself.
    
    Bob

    RE: .20
    >Is it correct to say that copies of the full annual reports (which are
    >given away freely by the other bank I use!) are STILL not available to
    >individual members?
    
    Yes.  Members can get copies of the brochures (minus notes) which DCU
    provides at each branch.
        
    >Do you feel that your being granted the right to LOOK at (but not copy)
    >them was viewed as a special favor?
    
    I'm not sure if it's a special favor.  Sure seems that way though.  If
    I can read them and copy the info down, what is the big deal about
    copying it?  If you take the time and go to the DCU HQ, they will
    probably let you view them too.  I view it as more of a hassle to me,
    since they wouldn't just send me copies that I could peruse in the
    evening.  Instead I had to take vacation time to do it.  They probably
    didn't think I'd bother.  
    
    >If yes (to either question) then I plan to request copies for myself.
    
    Probably a real good idea.  The more people that ask to see them, the
    more likely they will be to change their "approach".
    
    
    For the record, DCU HAS published their full financial reports, WITH
    notes.  You will be very amused to see when they stopped doing it.
    
    		Annual Report		Notes		Auditors
    		  Issued		Included	Statement Included
    		-------------		--------	------------------
    1980	    Yes			  Yes			No
    1981	    Yes			  Yes			No
    1982	    Yes			  Yes			Yes
    1983	    Yes			  Yes			No
    1984	    Yes			  Yes			No
    1985*	    No			  ---			---
    1986	    Yes			  No
    1987	    Yes			  No
    1988	    Yes			  No
    1989	    Yes			  No
    1990	    Yes			  No
    
    * = A copy of the actual annual report published for distribution was
    not available or couldn't be found.  It was stated that they may not
    have published one that year.  I have a copy that was issued by the
    auditors.
    
    Sentence from the bottom of the 1983 & 1984 Annual Reports:
    
    "The accompanying notes are an integral part of these financial
    statements."
    
    Gee, maybe we're just too dumb to understand them?  :-)

    
    I sent the following mail message to each DCU Director last Friday
    afternoon.  At this time I have received no response from any Director
    concerning this request.  I urge all those that want the complete
    DCU financial statements disclosed to make your desires known to the
    Board of Directors.
    
    Why should you or I have to take vacation time to go to DCU headquaters
    to read what should be readily available at a DCU branch?  DCU members
    in the field don't even have that option open to them.
    
    
    
From:	GUFFAW::GRANSEWICZ   "Phil DTN 264-1680 TTB1-2/B1 pole 2A3" 30-AUG-1991 14:33:00.45
To:	@BOD
CC:	GRANSEWICZ
Subj:	Open access to complete financial statements


	DCU Directors,

	As a member of Digital Employees' Federal Credit Union, I have
	requested copies of the financial reports for DCU (including
	auditors notes) from Harry Goralnick, Director of Finance and
	Operations.  He has stated that it is not within his authority to
	give me copies of the auditors notes.

	The auditors notes are required for DCU members to accurately
	read and interpret DCU's financial statements.  I have personally
	been allowed to go to DCU headquarters to read them and note
	statements and information which are contained within them.  There
	is no information in those notes that could be consider proprietary.
	One note concerning DCU's dealings with Digital was excluded.
	I will trust Harry's judgement on the withholding of this information.

	However, the rest of the information should be readily accessible
	to every DCU member that requests it.  Requiring members to use their
	personal time, and the time of DCU's senior management, to view this
	information is a needless waste of everybody's time.

	DCU has published the auditor's notes to their financial statements
	in the past.  Why has the disclosure of this vital information
	stopped or been severly restricted?  I will conclude this request
	with a quote from Page 13 of the 1984 Annual Report published by DCU.

	"The accompanying notes are an integral part of these financial
	 statements."

	Thank you for your timely response to this request.


	Regards,

	Philip Gransewicz
	DCU member

Ok, here's the REAL question....

	As shareholders in this company, aren't we legally entitled
	to view (and have made available to us at reasonable and
	customary duplication/mailing fees) complete financial statements
	INCLUDING all the notes and errata?

	And, as a legal Corporation in Mass, don't they have to file
	this stuff with some State department somewhere?

	Sorry if this has been asked/answered already.

Late nite,
/Chris

    Oh c'mon!  You want to go up to Beacon Hill and ask them for a copy of
    the DCU records?

>    Oh c'mon!  You want to go up to Beacon Hill and ask them for a copy of
>    the DCU records?

    Exactly our point.   Why should we have to when we OWN the company
    whose information we are requesting.
    
    Look at it this way:
    If DCU were a private company and you were a private investor relying
    on the 1990 DCU Annual Report (without auditor's notes) to make a
    decision to invest in DCU, then you would have been DENIED significant
    financial information concerning the operation and condition of the credit
    union.  So you decide to invest in DCU thinking you know the state of
    the credit union.  Then 2 months later, DCU reports that it has $18
    million in loan defaults (used to be $200-300K).  Now, as an investor,
    would you feel you were given a complete and accurate statement of the
    credit union at the time?  Would you feel the same way if the credit
    union went belly up?
    
    Now, whether it's a company or a credit union, financial statements
    that are published must be COMPLETE and accurate or they are worthless. 
    The auditor's refusal to allow their statement to appear without the
    the auditor's notes should make it crystal clear how important
    THEY considered these notes.

    
    For a real laugh and a truly prophetic note, please read note 95.*.  A
    golden oldie...
    

    The NRO branch had copies of the 1990 Annual Report (short, pamphlet
    version) on the counter with the rest of the DCU literature.

    RE: .27 (MACNEAL)
    
    >The NRO branch had copies of the 1990 Annual Report (short, pamphlet
    >version) on the counter with the rest of the DCU literature.
    
    Would you please call up Chuck and Mark and convince them to do this at
    the rest of the branches?  You seem to be able to get along with them
    better than the rest of us.  Would be much appreaciated!
    
    	- mark

    RE: .28
    
    Mark, what the heck are you talking about?

    RE: .29
    
    Getting copies of the annual report for free.  If I am not mistaken, it
    costs .25 per sheet to get a copy of the report.  I was glad to see
    that in some places DCU is not charging.  Would be nice to have this
    occur at all places.  You seem like a person who has a good repore
    with DCU and might try to make this happen.
    
    	- mark
    

�    Getting copies of the annual report for free.  If I am not mistaken, it
�    costs .25 per sheet to get a copy of the report.  
    
    You are mistaken.  Phil mentioned a while back about getting a report
    by asking a teller for it.  I mentioned what I saw in NRO today because
    it was a little out of the ordinary.  I haven't seen them available in
    the regular literature before - one also had to ask for a copy (but it
    has always been free).
    
�You seem like a person who has a good repore
�    with DCU and might try to make this happen.
    
    I have no more influence with the DCU than anyone.  I haven't even met
    Chuck yet (I was out the day he was in HLO).  Just because I may not
    agree with everything that is said in this conference doesn't mean that
    I am on the BoD's payroll.  That is an insulting insinuation as that
    says that I am not capable of thinking for myself.

>    I am on the BoD's payroll.  That is an insulting insinuation as that
>    says that I am not capable of thinking for myself.

Whoa pardner! I didn't get anything remotely resembling that out of what .-2
said. In fact, I value your questions and balance to the notes file as
trying to keep us from going off the deep end. I think most of your
questions are very appropriate.

However, given the BoD does read this notes file (and we do know that at
least some of them do), your inputs demonstrate that you are not as radical
as some of us participants in the notes file. I believe that's what .-2
was saying. If you (because you are probably not viewed by the BoD as a
radical), ask the BoD for something, they are more likely to respond
favorably to you than if I ask for something.

    >You are mistaken.  Phil mentioned a while back about getting a report
    >by asking a teller for it.  I mentioned what I saw in NRO today because
    >it was a little out of the ordinary.  I haven't seen them available in
    >the regular literature before - one also had to ask for a copy (but it
    >has always been free).

    Thanks for the information.  I misunderstood and thought we were being
    charged a .25 copying fee for it.  Lets hope the rest of the fees
    change.

    >I have no more influence with the DCU than anyone.  I haven't even met
    >Chuck yet (I was out the day he was in HLO).  Just because I may not
    >agree with everything that is said in this conference doesn't mean that
    >I am on the BoD's payroll.  That is an insulting insinuation as that
    >says that I am not capable of thinking for myself.

    Hmmm.  I think we started out on the left foot here.  I apologize if
    you felt that I was insinuating you are not capable of thinking for
    yourself.

    IMHO, the BOD will listen to your input.  I think we both agree that it
    is a positive approach to have the report available for free.  I feel
    that the board will be more attentive to what you say as they would
    view you as being more middle of the road.

    	Sorry for the misunderstanding,

    	- mark

    I didn't mean to fly off the handle.  I guess I was still caught up in
    some of the discussion surrounding the Special Meeting.

I asked my brother-in-law for a copy of the NCR Credit Union 1990 Annual Report.
I finally received it last week.

I could speak volumes about it, but suffice to say that DCU's Annual Report
falls miserably short of this. One of the more telling parts comes from the
report to the members from the Chairman of the BoD and the President - it speaks
in several places about how the Credit Union members are co-owners, and how
people-oriented and service-oriented a Credit Union should be. The financial
section is multiple pages, with the independant auditors report, and notes.
Just the financial portions of this report contains more information and takes
up more space than DCU's annual report. (I guess that's not hard to do..)

Anyway, one of the more innovative aspects of this is that it is pocket 
calendar size - with a 1991 calendar in it.

If anyone wants to see it and is in LKG, stop by. I have St Mary's Credit Union
report too.

Bryan

    
    Bryan,
    
    	How big is the NCR CU compared to DCU? (I.e., deposits, assets,
    membership size, etc.).
    
    	Those numbers could be relevant to any discussions with our (ahem)
    co-owners on the BoD (at the moment).
    
    Thanks,
    
    Bayard
    
    

    
    RE: .36
    
    Bayard, do you think the size of the credit union makes a
    difference?  If so, why?
    

They claim over 91K members (FY ending 9/30/90).

Assets break down as follows:

	Loans to members		120,428,831 (n 2)
	Investments		    	 34,801,608 (n 3)
	Cash				 10,570,572
	Office Properties and
	  equipment, net	 	  3,321,072 (n 4)
	Other Assets:
	  NCUA deposit		  1,552,621	    (n 5)
	  Due from broker	  1,042,000
	  Accrued Interest 
	    recievable		    868,232
	  Other			    394,831
				-----------
					  3,857,684
					-----------
		Total Assets		172,979,767
					===========

Liabilities and Retained Earnings:

	Savings accounts 		163,574,132 (n 6)
	Accrued & other liabilities	    577,982
					-----------
		Total liabilities	164,152,114

	Retained earnings, restricted	  8,827,653 (n 7)
	Commitment				    (n 2 & 9)
					-----------
	Total liabilities & retained
		Earnings		172,979,767
					===========
See accompanying notes to financial statements.

Notes 3 on investments:

				Amotized Cost	Market Value
US Govt agency, and 
  corporate obligations		$23,817,737	$23,697,488
Federal Funds			  3,950,000	  3,950,000
Common trust funds		  4,754,513	  4,754,513
Corporate Central CU Securities	  1,623,671	  1,623,671
Other				    655,687	    963,319
				-----------	-----------
				$34,801,608	$34,988,991
				===========	===========

Hope this provides interesting reading...
Bryan

    
    Why do I think the relative size is important?
    
    To get a feel for the comparison - I haven't done an analyis yet,
    but they claim over 91k members - we have ~88k, so it's nearly
    comparable. Now we can all go off and crunch and see how much
    money we should have made that we didn't because our BoD and old
    management team hadn't invested properly.
    
    BTW, I am really ticked off about the note they enclosed in the
    December statement about how the meeting and the new election is
    costing us $50,000. Once we get these jokers out of our way, and
    give Chuck a chance to invest our funds the way he was talking
    about at his talk in ZKO a couple of months ago, we'll make that
    $50k up in no time.
    
    

�    BTW, I am really ticked off about the note they enclosed in the
�    December statement about how the meeting and the new election is
�    costing us $50,000. 
    
    The letter didn't say that at all.  What is said was that they can
    avoid an additional $50,000 in expenses by holding the Special Election
    during the regularly scheduled election time frame.

    
    RE: .39
    
    I guess I was wondering about what the size of the institution had to
    do with the issuance of complete financial statements and their
    issuance to the membership.  IMO they should be required and available
    to all who ask for them.  No charge.  This is a cost of doing business. 
    People who request them should not be viewed as snoops or
    "witchhunters".  They could be statement inserts just like all the
    other DCU/BoD communication.  Saving pennies per member is a small cost
    to pay for an knowledgeable membership.
    
    
    RE: election cost savings 
    
    Yes, the BoD has taken every opportunity to point out how they are
    trying to save money and we are wasting it ($35K).  What I want to see
    is how much money DCU has spent on legal fees in this whole process. 
    And these cases usually take YEARS to resolve.  Money spent on
    membership participation in the credit union is money WELL spent IMO. 
    But that is a mode in which the current group is not used to
    functioning in.  The more we participate and know about OUR credit 
    union, the better for us.