Conference 7.286::dcu

360.0. "Cape Cod Times Article" by AOSG::GILLETT (And you may ask yourself, 'How do I work this?') Sat Nov 09 1991 23:39

[reproduced  without permission from the 
Cape Cod Times, Saturday 9 November 1991]


			CREDIT UNION DIVIDES DIGITAL
		       Cape fraud case linked to issue

				by
			Susan Milton
			staff writer

	HYANNIS - Employees at  an  international  computer  company  are
	fighting   over   how   to   run  the  largest  credit  union  in
	Massachusetts due, in part, to alleged fraud at a Cape Cod credit
	union.

	The  dispute  involves  the  Digital  Equipment  Corp.,  its $383
	million Digital Employees Federal Credit Union,  and  the  ripple
	effect  of  millions  of  dollars  of  losses  at  the now-closed
	Barnstable Community Federal Credit Union in Hyannis.

	The month-long campaign for control will end Tuesday at a meeting
	for  the  Digital  credit   union's   88,000   members   at   the
	Sheraton-Tara  hotel  in Framingham.  By filing petitions,  1,221
	shareholders forced a meeting with this agenda:

	   - To recall the present board of directors.

	   - To elect a new board in 90 days.

	   - To rescind controversial checking fees and minimum balances.

	To win votes, both sides have engaged in a month-long campaign of
	words and issues, aired through electronic bulletin boards,  mail
	and  messages  that  link  the  computer  company's  employees at
	various work sites in 83 countries.

	It is the kind of campaign possible at Digital Equipment Corp., a
	pioneer  and  world  leader  in  interoffice  communications  and
	networks.

	Much of the campaign, sparked by proposed new fees  on  once-free
	checking  accounts, is about how a non-profit credit union should
	serve its owners.

	"A lot of people feel that the (Digital) credit union began as  a
	credit  union and slowly turned over the years into a bank," said
	Christopher Gillett, among those petitioning for  a  change.  "We
	don't  want  a  bank,  we  don't  need a bank.  We need favorable
	interest on our savings and favorable rates on our loans."

	A related campaign issue is the credit union board's $18  million
	in losses from 12 speculative commercial loans that were funneled
	through the Hyannis credit union.

	Phil Gransewicz, another  petitioner,  said,  "It's  basically  a
	matter  of trust with the board.  We don't feel they've been open
	and  forthcoming   with  information  and  the  facts  of  what's
	happened."

	The   intent   of  Tuesday's  meeting  is  simply  to  provide  a
	referendum, one vote  per  shareholder,  on  the  credit  union's
	policies and future direction, according to Gillett.

	Neither  side  would  release any written campaign statements for
	publication.

	"It's an internal issue between the board and members which  will
	be   resolved   at   the  special  meeting,"  said  credit  union
	spokeswoman Mary Madden yesterday.  "The  board  doesn't  feel  a
	public forum to discuss it is necessary."

	According  to  one source, board members have warned shareholders
	that their opponents are on a "witch hunt" to discredit the board
	and  the  credit  union.   Its  removal, the board said, would be
	disastrous and, at best, paralyze the credit  union  for  several
	months.

	In  response,  Gransewicz  called  the loosely knit opposition "a
	grassroots movement."  Also, Gillett said, if shareholders should
	want  a  new  board,  the  company has many qualified people that
	could run for the board.

	Both sides are trying to convince credit union members, who  must
	be  past  or  present  Digital Employees and their families.  The
	credit union now has 88,000 members, including about  20,000  who
	are not current employees.

	Neither side would speculate on the numbers of people involved in
	the dispute.

	"If they know how many we are  and  where  we  were  (at  Digital
	sites)  it  would  disclose the true organization and size of the
	effort," Gransewicz said.

	Ms.   Madden  reported  fielding   several   calls,   some   from
	shareholders concerned about the removal of the entire board "and
	what seems to be a small group of people, able to decide the fate
	of a credit union."

	The stakes at Tuesday's meeting are higher than the $35,000 cost,
	estimated by the board, of calling such a special meeting.

	Serving on the board are vice presidents and  other  high-ranking
	officials   at   the   computer   company.    For  example,  Mark
	Steinkrauss, credit union board chairman, is  Digital's  director
	of  investor  relations.   He also will lead the special meeting,
	which will be closed to the public, Ms. Madden said.

	There  have  the official  blessing  of  the  corporate  leaders,
	according to a  recent   flurry  of  campaign  endoresements  and
	statements.

	Digital executives have told subordinates, via personal  computer
	messages,  that  their support for the board would be appreciated
	at next week's meeting.

	Yesterday, the company itself, via  spokesman  Nikki  Richardson,
	publicly  endorsed the current credit union board and management,
	and described the credit union as stable.

	The credit union was founded in 1980  as  a  benefit  to  Digital
	employees  and  the  company  itself  is  a  credit  union member
	(depositor) "so of course we are interested in  its  well-being,"
	she said.

	Digital    employees   read   a   similar   endorsement,   posted
	electronically, from  corporate  Vice  President/Treasurer  Ilene
	Jacobs, who noted the credit union's many challenges last year.

	Among  those  challenges  was the Barstable credit union scandal,
	revealed in March when federal regulators took  over  the  credit
	union.

	Among  its  leaders  were two people linked to the Digital credit
	union - Richard Mangone, its president since 1983,  and  longtime
	counsel  Rober  Cohen  of Newton.  They are among five defendants
	later charged with $47 million of fraud  at  the  Hyannis  credit
	union.

	In  addition,  the  Digital  credit  union board fired Mangone in
	April and sued him in June over $18  million  in  12  bad  loans,
	ranging from $1.2 million to $4.1 million.

	The  pending  civil suit claims that Mangone originated the loans
	at the Hyannis credit union and, using faked and  falsified  loan
	documents, convinced  the Digital credit union board to buy 70 to
	90 percent of the large loans.

	Angry shareholders only discovered  the  Cape-related  losses  in
	unpublished  auditor's  notes  in  August,  when  they looked for
	reasons why Digital credit union may need new  fees  to  generate
	new income, Gransewicz said.