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>Chuck said little new on this subject. He did say that he thought the Board
>of Directors had exercised due care, or words to that effect. I don't
>suppose he could have said anything different.
DCU currently has a lawsuit pending against Mr. Mangone for $10
million. DCU's President is NOT going to say that the BoD didn't do
their job. He is also not going to say his bosses didn't do their
job.
>He also justified the loans
>on the grounds that they earned $7M before they went sour. He later said
>what sounded to me like a statement that the NCUA in general won't discover
>fraudulent loans while they are making money, but only after they start
>losing money. I don't find that very reassuring.
So DCU earned $7 million on the participation loans. Considering that
some of these loans were for SUBSTANTIALLY MORE than the value of the
property and then part of our own money was paid back to us (and is now
being called earnings), this justification is ludicrous. Obviously,
people engaged in this type of activity aren't going to hook you in if
you think you're going to lose money.
>Chuck said that the meeting does not have to be held in 30 days (an odd
>statement from a former NCUA employee, if the claims that the NCUA thinks
>it has to be held in 30 days are true). However, he did say that the
>announcement will be sent out soon, and that it will be held in a few
>weeks.
I am particularly dismayed at this comment by Mr. Cockburn. Especially
since he stated otherwise on the phone during our discussion of the
petition submission and subsequent special meeting. His change of mind
may have occurred during the 1 hour he spent with Mr. Steinkrauss
awaiting our delivery of the petitions. Wonder why he refuses to
simply call the people at the NCUA in Albany. I gave him the person to
ask for. Since he worked for them for 10 years, I assumed he knew
their phone number.
>Chuck said that he thinks the board should not be replaced, as it
>will lose the DCU lots of money to do that, and the current board is
>doing a good job.
Replacing the board will lose DCU lots of money?? He actually said
this? Are you sure? Why would replacing the Board of Directors lose
DCU lots of money? So far having them has lost us $15 million. And
keeping them and their policies will cost us more in the future.
He has been on board for 1 month. We have YEARS of experience with
this BoD. Everybody should make their own judgement based on the
facts, deeds of the past and what is currently going on.
>I asked if the Board had been consulting lawyers regarding the special
>meeting. He replied that no lawyers have been hired regarding the special
>meeting, though the Board does discuss everything they do with the DCU's
>general counsel.
In other words, yes. What he appears to have said is that DCU hasn't
hired any new lawyers for this purpose. They are using their existing
lawyers. From their very active participation in the "informal
discussions", you can rest assured their lawyers are involved in a
matter which threatens their continued presence on the BoD.
>he is more loyal to the members than to the board. Maybe his source of
Unfortunately, he hasn't demonstrated this yet. He has given some VERY
mixed signals.
>Anyway, he repeated the line about how a dozen people are innundating his
>office with information requests, and that's why the info protection
>policy was set up. After all, he needs to spend his time running the CU,
>not answering information requests.
So answer the questions or provide the information. What IS the big
deal. The two pieces of information I've asked for are reports by
independent auditors; auditors notes to financial statements and
election reports. I requested copies of the auditors notes to the
financials before Mr. Cockburn was even hired. The election
information was supposed to be sent to me days before the new
information control ploicy was implemented and then unexplainably
withheld.
Also, these requests do not go to him. They go to Mary Madden. Why
should he worry about this? Does he approve or disapprove of what gets
released?
>Two of us pointed out that the hottest
>lights in the conflict with the board have all said that they aren't doing
>that, so just who is he referring to? Chuck didn't respond to that.
Funny how they all seem to use the "few troublemakers" line, but when
asked to substantiate it, can just never do it. If they had simply
released the information, it would have been posted here. The requests
for information on them would have DECLINED.
>Chuck said that the board had been very forthcoming, scheduling two 4 hour
>meetings with members -- that were lightly attended. Nobody pointed out
>that the meetings had almost no advertising, and that the first was announced
>(I think) just one day before it was held. Chuck specifially said that he
>felt the board were forthcoming in that second meeting, but that certainly
>wasn't my own opinion.
Yes, lightly attended. Again this is mentioned. I do get the distinct
impression that he and the BoD think there are only a hand full of
people out here that care about what is going on.
>Chuck also said (note carefully) that the board had been giving information
>before those meetings, they gave information at the meetings, and they gave
>information after the meetings, and only instituted the info protection
>policy when they got innundated with requests. (!) There wasn't a chance
>to follow up on this effectively, but I for one would like to know who it
>was who got information after the second meeting and before the information
>protection policy. I've not heard of anyone getting information under the
>terms of the info protection policy, either.
This is pure BS. They said during the informal discussions that they
saw no reason why the auditors notes to the financial statements
couldn't be released, yet where are they? Given their past
performance, the BoD's definition of "open and forthright" and ours are
two entirely different things.
>Several people made the point that the DCU needs to bend over backwards to
>communicate with members in order to regain lost trust. Chuck seemed
>receptive to the comments. Chuck even said that if he'd been here,
>information would have flowed much more freely in the early days.
Well he's here NOW. And DCU has NOW implemented an information control
policy. He seems to have convinced the BoD to delay implementation of
(some) checking fees yet he says the above while endorsing absolutely
draconian policies. Will the real Chuck Cockburn step forward?
>Chuck said that any loan to an officer or board member that wasn't available
>to the general membership would be illegal, and if he found out about such
>a loan, he would fire the person who got it. I asked how he would fire a
>board member, if one were involved, and he said he'd tell the supervisory
>committee, and if they didn't fire the board member, he'd call up the NCUA,
>who would kick out as many people as necessary to make sure that the one
>who got the illegal loan was out. I am glad to have this point clear.
Hmmm, maybe I should call him and Mr. Steinkrauss up and we can arrange
for a meeting where they can prove to me that this loan is normal. My
calander is always open should they chose to communicate.
As for the Supervisory Committee, it does not function. To say he will
use it amazes me. Did he tell you the BoD appoint the people on it?
And that one of the BoD currently serve on it? And that a unanimous
vote must occur to remove a Director? In short, I won't hold my breath
for action by the Supervisory Committee.
And while you're calling NCUA Chuck, check on what the definition of
"call" is. He's probably afraid of the answer though.
>least, how I interpreted note 293.0. I thought Chuck replied that Mangone
>didn't even have a mortgage loan, but I expect I mis-heard him.
Hmmm.... He sure had something in May 1991. I can only say what that
statement said.
>Incidentally, Chuck said that the supervisory committee will now meet once
>a month. Apparently, they were moribund before this, which Chuck
>attributed to the actions of the previous president and to the confusion
>of the period when there was no preseident.
Again, Mr. Mangone is used as a scapegoat. I have been told that the
Supervisory Committee hasn't functioned or meet in YEARS. These are
3 professional people who should understand their duties and
responsibilities on this committee or they should resign or be
dismissed. How much more can they possibly hope to pin on Mangone?
>needs to earn a profit to maintain the capital ratio, or to improve it
>if it is too low (as ours is).
Yes, it is now low. Thanks to our BoD. But they are doing a great job
and we will lose LOTS of money should they be removed... ;-)
>Chuck minimized fees as a way to earn a profit. He said the big problem
>is that we have too much money in investments (which typically earn about
>6%) as opposed to loans to members (which earn 9-10%).
Chuck must be reading some of my notes! I've said this for the last 2
months. DCU members are DCU's best investments. That is the whole
reason credit unions exist. Wonder why the BoD never realized what
was so clearly in front of them?
>There was talk of growth -- last year, DCU grew 1% and the two years before,
>about 8-12%. Growth requires profits, and Chuck said that he's working on
What do these percentages represent? Growth of deposits? Membership?
>Chuck said that we have an amazing loan default rate, if one excludes the
>participation loans -- just 0.3%. He said he's looking at loosening the
>credit requirements for making loans to members. I gather the reason
>behind this is both because of of the very low write-off rate and because
>we really need more member loans to gain profit and a better capital ratio.
Again, the term I've used in the past is "obscenely low". But this all
seems like Credit Union 101. Did we really need a new president to
discover these very basic truths?
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| Here are some clarifications on points Phil raised in 313.1:
>> Chuck said that he thinks the board should not be replaced, as it
>>will lose the DCU lots of money to do that, and the current board is
>>doing a good job.
>
> Replacing the board will lose DCU lots of money?? He actually said
> this? Are you sure? Why would replacing the Board of Directors lose
> DCU lots of money? So far having them has lost us $15 million. And
> keeping them and their policies will cost us more in the future.
Yes, I'm sure Chuck said the DCU would lose much money if we get rid of
the board in the special election.
I felt .0 was getting awfully long, or I would have added that I can't
figure out how firing the very best of DCU boards would lose the DCU
lots of money -- *provided* that we had a good President in place who
is making good policies. After all, I've been told repeatedly that the
board has no operational responsibilities, but rather sets policy and
does a few other things. Let's assume 3 months for an election and
3 months for a new board to begin functioning. We survived that long
with no president -- surely it would be far easier, with a strong and
decisive president in place, to surive that long with no board.
And that's with a board that isn't mistrusted by a large fraction of
those who have the least awareness of what is going on. If we're
talking about the DCU losing more money, then I think we need to add
up how much money has been withdrawn from the DCU by now -- I suspect
that many people waited until October so that they could get their
last quarterly interest payment before acting. Others didn't lose
their faith completely until the information protection policy.
If the current board cannot act to regain member trust, then would
removing them really hurt the DCU worse than retaining them?
Hmm... maybe this is actually the strategy. We have too much money
in investments and we have too low a capital ratio. Perhaps encouraging
members to withdraw deposits makes the DCU stronger? :-)
[Note to board members: the shape :-) is called a "smiley face"
and means that someone is not being serious. Look at it sideways.]
>>Chuck also said (note carefully) that the board had been giving information
>>before those meetings, they gave information at the meetings, and they gave
>>information after the meetings, and only instituted the info protection
>>policy when they got innundated with requests. (!)
>
> This is pure BS. They said during the informal discussions that they
> saw no reason why the auditors notes to the financial statements
> couldn't be released, yet where are they?
Precisely what I asked Mark last Friday. Later this week I'll try to
make time to report on Mark's answer, if he hasn't posted something
in the meantime. I'd rather have Mark post his own words on this.
> Given their past performance, the BoD's definition of "open and
> forthright" and ours are two entirely different things.
This is a completely fair statement. I think I have a right to see things
like the independent auditor's statement; Mark says I have no such right.
That basic difference inevitably leads to some major disagreements on what
constitutes being open and forthright.
>>Chuck said that any loan to an officer or board member that wasn't available
>>to the general membership would be illegal, and if he found out about such
>>a loan, he would fire the person who got it. I asked how he would fire a
>>board member, if one were involved, and he said he'd tell the supervisory
>>committee, and if they didn't fire the board member, he'd call up the NCUA,
>>who would kick out as many people as necessary to make sure that the one
>>who got the illegal loan was out. I am glad to have this point clear.
>
> As for the Supervisory Committee, it does not function. To say he will
> use it amazes me. Did he tell you the BoD appoint the people on it?
I asked about that, too -- it's wonderful how well informed one can become
by reading notes. What Chuck said was that in a case like this, the NCUA
*would* replace the supervisory committee if they wouldn't act. I
certainly hope that's the case. To me, the main point is that Chuck has
now given his word that anyone who has an illegal loan (which he defined
as any loan not available to the membership at large) *will* be fired.
I'm prepared to believe Chuck -- but of course, if it turned out that he
was lying, I'd be in the van of the mob trying to dump Chuck.
>>I thought Chuck replied that Mangone didn't even have a mortgage loan, but
>>I expect I mis-heard him.
I've heard that someone else heard Chuck say that Mangone didn't have a
mortgage loan. This confuses me because when I spoke with Mark, he
explicitly referred to Mangone's mortgage loan, as do the court papers.
This may be a small point, but I'd appreciate it if someone official would
resolve the discrepency.
>>There was talk of growth -- last year, DCU grew 1% and the two years before,
>>about 8-12%. Growth requires profits, and Chuck said that he's working on
>
> What do these percentages represent? Growth of deposits? Membership?
From context, I'm pretty sure he was talking about deposits. Prior to the
past three years, growth was something like 20%. Chuck thinks we can get
back to the 8-12% growth level, though not to the 20% level.
>>Chuck said that we have an amazing loan default rate, if one excludes the
>>participation loans -- just 0.3%. He said he's looking at loosening the
>>credit requirements for making loans to members.
>
> Did we really need a new president to discover these very basic truths?
After all the discussion of this point in the notes file, it was pleasant
to hear Chuck claim it as truth from his experience at other credit unions.
Chuck said that he and Mangone had different philsophies of how credit
unions work, and that Mangone's methods are about 20 years out of date.
So maybe we did indeed need a new president to return us to reality.
Actually though, I suppose Mangone was too busy running his fraud to care
a whole lot about making the DCU efficient. :-)
Enjoy,
Larry
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