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| 4.1 | Board Memo 30-SEP-1992, discuss in 612 | ESBLAB::KINZELMAN | Two Terms, 1 in office, 1 in jail | Wed Sep 30 1992 17:27 | 71 |
|
DCU Board Memo 30-SEP-1992
This communications memo is from the Board of the Digital Employees'
Federal Credit Union and may be forwarded to any DCU member.
To increase the level of information shared with DCU members, the
Board has created a new communication vehicle called "DCU Board Memo".
This memo will be distributed via the SMAUG::DCU notes file and VTX.
Since all members do not have access to notes or VTX, a copy may also
be obtained by calling the DCU Hotline (800-328-8797 or dtn 223-6735)
and requesting a copy. The availability of the Board Memo will also be
posted at the branches and copies will be available at the branches.
Notably, the DCU Network quarterly newsletter will continue but is
viewed primarily as a forum of DCU management. The Board Memo is exclusively
the responsibility of the Board to be used for communicating information
directly to the membership. However, DCU management may choose to
summarize Board Memo issues in subsequent Network newsletters.
The DCU Board Memo will have no regular schedule. Our current thought
is that a memo may be sent out following our monthly Board meeting
to communicate any action or discussions considered to be of general
interest to the membership. Thus, the members will no longer have to
wait until the official Board minutes are published to learn what, if
any, pertinent issues have been discussed or acted upon.
------------------------------------------------------------
This first Board Memo concerns a change the Board made at the
September 22, 1992 Board meeting. We voted to amend the bylaws to
eliminate the volunteer Credit Committee. DCU, as well as other
credit unions of our size, have professional, full time loan
officers in charge of the day to day duties of granting loans
to members.
However, one important function of the Credit Committee is the
hearing of members' appeals for the granting of loans refused by a
loan officer. Without the Credit Committee, this task would fall upon
the Board. We felt that we would prefer to have a separate body
specializing in this function.
In place of the original Credit Committee, we voted to establish a
new "Credit Appeals Committee" to better focus the committee's
responsibility. The members of this separate body, the "Credit Appeals
Committee", would be empowered to uphold or overrule a loan officer's
original decision.
We also decided that there should be five people on this committee, with
a mix of three DCU employees and two volunteers from the membership.
We have appointed the following people to the Credit Appeals Committee
for a one year term:
Donna Nemensky, Acting Consumer Loan Manager
Patricia Coyle, Loan Service Manager
Pat Gencarella, Mortgage Underwriter
Jack Hutchinson, volunteer
Chris Gillett, volunteer
The two member volunteers are committed to providing responsive service
with respect for member confidentiality. We will soon communicate a
process to replace volunteers to the Credit Appeals Committee, in the
event such replacements are needed.
Members who have been turned down for a loan and wish to appeal the
decision may call the DCU to schedule a meeting with the Credit Appeals
Committee.
We think this is a positive change. If you have any feedback please do not
hesitate to contact Paul Kinzelman, Secretary, or any other member of the
Board of directors.
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| 4.2 | Board Memo 1-DEC-1992, discuss in 622 | ESBLAB::KINZELMAN | Paul dtn223-2605 | Tue Dec 01 1992 21:11 | 22 |
|
********************
* *
* DCU BOARD MEMO *
* * SUBJ: Check cashing by non-DCU members
* 1-DEC-1992 *
* *
********************
Until recently, DCU had a practice of cashing Digital (DEC) checks for
non-DCU members. We have just been informed by the NCUA (the
federal credit union regulatory agency) that our credit union may not
offer this service to non-members. As a result, we have been forced
to discontinue this service.
However, we encourage people within our field of membership
(Digital employees and relatives) to open an account to retain check cashing
privileges. We would also like to point out that DCU has made many positive
changes over the past year. Please take this opportunity to re-discover what
financial services DCU has to offer you and your family. The Board and DCU
management believe that you will find our products and services to be
competitive.
|
| 4.3 | Board Memo 2-DEC-1992, discuss in 624 | ESBLAB::KINZELMAN | Paul dtn223-2605 | Wed Dec 02 1992 20:12 | 408 |
| ********************
* *
* DCU BOARD MEMO *
* * SUBJ: Bylaw changes:
* 2-DEC-1992 * Membership Bill of Rights
* *
********************
This board memo contains the text of proposed bylaw ammendments. The
formal vote has not taken place, but all of the changes herein have
passed a concensus vote by the board at a meeting held 19-Nov-1992.
Since these changes affect membership rights, we have chosen to make the
changes in a two step process. We would like the membership to have the
opportunity to provide input to these changes before a formal vote by
the Board is taken.
The changes are not yet written in final form. Both the bylaw changes
and the justifications for each will be rewritten before submission to
the board for final approval and to the NCUA. Notwithstanding, the
writeups should be sufficient for the membership to understand the
objective of the changes.
We would like to encourage membership input on these bylaw proposals, as
well as others that are of interest to the membership. In order to
insure that there is full understanding of the impact of these proposals
we are willing to schedule an information session for all interested
members. Please contact the offices of the DCU (508-493-6735x221), if
you would like to attend an information session. Once we are able to
gauge the interest and the potential size of the group or groups, we
will establish the appropriate time and place for an information
session. For those members who are not in the Maynard area, a dial-in
to the meeting can also be arranged.
********************************************************************
OVERALL JUSTIFICATION: Most of these bylaws are proposed to make the
relationship between the board of directors and the membership more
equitable. These bylaw changes will encourage more volunteer
participation in our credit union. A credit union with involved
members is far stronger than one whose members are uninvolved. These
changes will help insure that if members wish to become involved, they
will be encouraged to do so.
Our responsibility as a board demands that we make the business of the
credit union as accessible to the members as possible while protecting
confidential information. Most of these changes can be regarded as a
"Membership Bill of Rights". These revised bylaws will make the process
much easier for DCU members to materially participate in the strategic
direction of our credit union. Remember that the credit union belongs to
the members, not the Board. The Board of directors role is two-fold:
to represent member needs while maintaining the credit union's safety and
soundness.
Each of these changes address a particular issue or problem which arose
during the divisive special meeting and election last year. If these bylaws
had been in place, perhaps the process and election last fall would
not have been so acrimonious. We look at these changes as an investment
in DCU's future to ensure member involvement is a protected right.
----------------------------------------------------------------
1) In some places in the bylaws, the term "president" means the
head of the board and in other places it means the CEO. This change
would clarify the bylaws by changing all the places that mean the head of
the board to "chairperson". (Note Also, "vice-president" should be changed to
"vice-chairperson"). Further, to remove any gender bias, all instances
of "chairman" should be changed to "chairperson".
In the following sections, "president" must be changed to "chairperson":
Article V Section 3 (5 instances)
Article VI Section 1 (1 instance)
Article VI Section 2 (1 instance)
Article VI Section 8f (1 instance)
Article VII Section 4 (4 instances)
Article VIII Section 3 (3 instances)
JUSTIFICATION:
This clarifies the bylaws such that the powers entrusted to the chairperson
of the board are not confused with those given to the CEO.
----------------------------------------------------------------
2) Article V Section 6:
Any member may propose lawful new business for the annual meeting,
provided the member does so in writing to the chairperson at least 15 days
before the annual meeting notice is mailed out. Each new business item
put on the agenda will be noted as being either advisory or binding as
determined by the credit union's general counsel and the board of directors.
JUSTIFICATION:
There is nothing in the bylaws that spells out how a member can bring forth
a topic at an annual meeting. This process should be spelled out so that
the board encourages any member to bring up business s/he believes is
important. NCUA has determined that the membership will not have certain
powers (for instance to set interest rates), thus, some motions can only
be advisory. These motions will be noted as "advisory" in the motion.
Last spring, members were told that they could not bring up business at the
annual meeting.
----------------------------------------------------------------
3) Article V Section 7:
Any member may cause DCU to mail DCU related information to the membership
at the next quarterly full-membership mailing or any election ballot
mailing provided:
1) The information is clearly marked as not originating from DCU.
2) The information is DCU related.
3) The information is not libelous nor is it DCU confidential
information nor is it partisan with respect to individual
candidates running for the board of directors.
4) The member submits at least 500 validated membership signatures.
5) The member provides printed statements on 50 lb opaque paper of
size 3.5 x 8.5 inches in sufficient quantity for the mailing.
6) The information and signatures are provided to the credit union
21 business days before the mailing is scheduled to occur.
JUSTIFICATION:
One of the advantages of incumbents is greater access to the membership. This
bylaw change would allow any member to address the membership but with
enough safeguards to eliminate frivolous information.
The cost of the inserts at the current membership level (about 85,000)
would be about $650 for single sided, and $1050 for double sided.
DCU counsel indicates that this Amendment is supported in several state codes.
----------------------------------------------------------------
4) Article V Section 8:
Unless otherwise moved during an annual or special meeting of the members,
any member may make an audio or video recording of the meeting provided
the recording devices are not physically obstructive to the meeting. In
accordance with Robert's confidentiality requirements, the recording of
any disciplinary actions will only be made available to DCU members, not
to the press or the media.
JUSTIFICATION:
Many members are not in an area in which they can travel to a meeting. They
are still members and have a right to find out what happened at membership
meetings for themselves. Any member having enough interest in a meeting to
record it for other members should be encouraged in the bylaws to do so.
----------------------------------------------------------------
5) Article VI Section 1 - Change from 500 to 200 signatures required for
a petition candidate.
JUSTIFICATION: 500 signatures is too many signatures for one member to
gather especially if they are working full-time. We wish to encourage
membership involvement. If somebody wants to run for the board, we
should encourage them.
----------------------------------------------------------------
6) Article VI Section 8(c)1 - Remove last sentence concerning biographical
sketches.
JUSTIFICATION: Biographical sketches are handled in the change below
under Article VI Section 8(c)6. The bylaws currently address credit unions
that put the biographical sketch on the ballot itself. DCU has a separate
booklet for the candidate writeups.
----------------------------------------------------------------
7) Article VI Section 8(c)1 - Add:
Candidates already a member of the board of directors by virtue of
appointment will appear on the ballot with the designation "appointed"
rather than "incumbent".
JUSTIFICATION:
This will prevent the board from making an appointment and advertising
the board of director as an "incumbent" at the next election. The
membership should be informed if a candidate was not elected but appointed.
----------------------------------------------------------------
8) Article VI Section 8(c)6 - Add:
One listing of all the candidates and their position statements in the
same order as the order of the names on the ballot. The word limit for
each candidate is 300 words and will be printed as submitted by the
candidate without editing except that the statements must not contain
libelous statements or DCU confidential information.
If portions of any candidate's statement will be bolded
or accentuated in any way, the same format of text must be offered to all
candidates when candidate writeups are requested.
JUSTIFICATION:
Today, the bylaws specify that the order of the names on the ballot be
random, but does not specify the order of the names in the position statement
booklet. In fact, the bylaws direct that the position statement (or
biographical sketch) be put on the ballot itself. Our election process
generally specifies that the position statements be put in a separate book
rather than on the ballot. This bylaw change would require that the order
be the same on the ballot and in the position statement book.
Furthermore, a ballot should contain enough information about a candidate
for a member to make a reasonable judgement about that person's candidacy
(300 vs 150 words). In addition, rules are needed to make sure that the
credit union does not promote bias toward any candidates (other than by virtue
of the fact that the nomination committee nominates candidates).
----------------------------------------------------------------
9) Article VI Section 9
Current DCU employees (including the CEO) shall not serve
on the Nomination Committee, nor shall any current DCU employees
take part, during regular business hours, in any DCU election or
campaign at any location or on any property to which they have access
soley by virtue of their DCU employment.
JUSTIFICATION: The Hatch Act prohibits federal employees' involvement in
federal election campaigns. For the same reasons that the Hatch Act was
passed, credit unions need the same protection. By analogy, the precedent
has been set.
The only way to guarantee that DCU employees are not under any pressure
from incumbents is to prohibit them from participating in the elections.
The "during regular business hours" is to make it more acceptable to the
NCUA because this bylaw would limit the rights of some members (employees)
to participate in the campaign.
----------------------------------------------------------------
10) Article VII Section 1
Append to first sentence "but not current employees of this credit union."
JUSTIFICATION: This bylaw prevents DCU employees from running for a seat on
the board of directors. This change would eliminate that possible
conflict of interest.
----------------------------------------------------------------
11) Article VII Section 10:
The nomination committee will not nominate for the board any current
board member who has served on the Board of Directors for more than
the last six contiguous years. If the member runs by petition, the
position statement must contain the statement (but is not counted toward
the 300 word limit):
"This candidate has served on the board for at least the last
six years. To encourage turnover on the board, the nomination
committee does not endorse candidates that have completed two
consecutive full terms."
JUSTIFICATION: Turnover on the board will encourage more membership
participation and allow new people to take fresh approaches. Note that
this bylaw would still allow the director to run again after taking at
least one year off. The fundamental basis of having multiple people directing
the credit union is to guard against too much power being concentrated in
one person. Directors that stay on the board forever may become too
powerful as a group, gain too much control over communication mediums, and
make their removal next to impossible.
The NCUA has dogmatically rejected all attempts by credit unions to institute
term limitations. They have suggested that credit unions desiring term
limitations do so by directing the nomination committee not to nominate
a "term-limited" incumbent, but the incumbent can still run by petition.
----------------------------------------------------------------
12) Article VIII Section 5(h):
Make available to the membership by March 15 of each year the annual
report, including the external auditor's notes, of the credit union
covering the previous year.
JUSTIFICATION:
Members have a right to know the financial condition of the credit union
prior to the election of the board of directors. Previously, the annual
report has been released at the annual meeting, long after the report might
affect the vote of the membership. We are already planning to accomplish
this, but we feel that the bylaws should require future boards to continue
to do this.
Note: the date may change upon Chuck finding out when the auditor can finish
his audit and supply the notes for the annual statement. The goal is to set
the date after the auditor notes are available and before the ballots are
sent to the membership. If necessary we may need to change the date of the
election process and annual meeting.
----------------------------------------------------------------
13) Article VIII Section 8... insert after the first sentence:
The minutes of all board meetings, including a record of how each
member voted on each motion, will be available for inspection or copying
by the membership except for necessary redaction.
JUSTIFICATION:
There is no more basic right in a democratic institution than to be able to
find out how your representative is voting. The Board has an obligation to
represent the best interests of the membership and to be held accountable
to the membership. Note that we are already doing this, but we feel that
the bylaws should require future boards to do this as well.
----------------------------------------------------------------
14) Article IX Section 5:
The Credit Appeals Committee will contain a mix of 3 DCU employees
and 2 volunteers for a total of 5 committee members. All members will be
appointed by the board after each annual (organizational) meeting. DCU
employees are allowed to serve in the two volunteer positions if there are
no interested members in good standing willing to serve. This Committee
will report to the Board on a monthly basis.
JUSTIFICATION: More volunteer participation. Professionals will be able to
overrule the volunteers but they will have some input.
Note that we already have this committee, but we feel that
the bylaws should require future boards to have the committee as well.
----------------------------------------------------------------
15) Article X Section 1:
Change sentence #4 the part after the colon:
OLD: Regular terms of committee members shall be for periods of 1, 2,
or 3 years as the board shall determine: Provided, however,
that all regular terms shall be for the same number of years and
until the appointment and qualification of successors.
NEW: Each regular term of a committee member shall be for periods of 2
or 3 years as the board shall determine. Each term shall continue
until the appointment and qualification of a successor.
Note to NCUA: Two of the committee members were originally appointed for 2
years until we discovered it was against the current bylaws so we changed
all the terms to 3 years. This bylaw change would allow the board flexibility
in changing some terms back to 2 years and thus stagger the supervisory terms.
JUSTIFICATION:
This will prevent all supervisory committee members' terms from expiring
at the same time.
----------------------------------------------------------------
16) Article XIX Section 3 - Append to the end:
The vote for any such removal will be by secret written ballot and the
completed ballots and all logistics of the balloting will be handled only
by people not eligible to vote. Vote counting may be observed by any
interested DCU member. Upon request, DCU will supply the proper legal
language for the motion.
JUSTIFICATION:
A removal of a board member is an important enough topic that it must be
done without even the slightest hint of impropriety.
The reason for the last sentence is that according to DCU counsel, the
special meeting motion to remove the board was illegal because it did not
contain a statement of the legal process to remove a board member. With
this bylaw, a member can ask DCU for the proper language to make the motion
legal.
----------------------------------------------------------------
17) Article XIX Section 9:
All records of the credit union, except for those specifically required
to be held confidential, will be available to members for inspection
or copies during normal credit union business hours. Any denial of
information must be accompanied by a reason. Generally, information
will be provided free of charge, however, management will use its
discretion when a substantial amount of duplication and/or research
is required in which case copying will be done at normal commercial
copy center rates. The cost of information will not be used to discourage
members from obtaining information.
Any member may appeal a refusal to provide information in writing to the
chairperson of the board. The member must include 200 validated signatures
from current DCU members. The chairperson will read the member's statement
at the next regular meeting of the board and the board will vote to either
affirm or disaffirm the refusal. The motion to affirm the refusal
must be carried by a 2/3rds vote of the board members present; otherwise
the information will be released. The release will be subject to DCU
general counsel's decision that the release is lawful.
JUSTIFICATION:
This bylaw encapsulates DCU's Information Policy We believe the current
wording is a cleaner way of expressing the intent of the current IP
policy. This also puts the policy into the bylaws.
The default for information availability should be that information is
available to any interested member unless there's a specific reason why the
information must be denied. Moreover, there is currently no process in
place for a member to appeal a redaction. The second part of this motion
would formalize this process.
Note that this policy is similar to the Federal Freedom of Information
Act (FOIA) and will be further justified to the NCUA based on that precedent.
----------------------------------------------------------------
18) Section XXI Section 1 - Prefix by "Except as provided by Section 2..."
JUSTIFICATION:
See change for Article XXI Section 2 (below)
----------------------------------------------------------------
19) Article XXI Section 2 - Add:
The following bylaws may only be changed or removed by a 2/3rds vote of
the Board together with a 50% plus one vote of the general membership
ballots cast at the next scheduled Board of Directors Election. The issue(s)
will be included with the board of directors ballot. A maximum of 500 words
of explanation of each side (each written by a member or group of members in
favor of the respective side) for each issue will be included with the ballot.
1) Article V all sections
2) Article VI all sections
3) Article VII Sections 1
4) Article VIII Section 5(h), 8
5) Article IX Section 5
6) Article XIX Section 3, 9
7) Article XXI all sections
JUSTIFICATION: On Aug 5, 1992, Marcia Sarrazin (NCUA, Albany) characterized
the bylaws as a contract between the board of directors and the members.
A contract that the Board can change at a whim without even notifying the
members is not a contract. This bylaw change would make the bylaws a contract.
Without this amendment, any non-standard bylaw changes could be removed by
a board vote at any time. The effect would be that these non-standard
changes would be voluntary, not binding, on the board. We believe that the
board, the members, and the operating management of DCU should be
bound by these fundamental membership rights.
|
| 4.4 | Board Memo 11-DEC-1992, discuss also in 624 | ESBLAB::KINZELMAN | Paul dtn223-2605 | Fri Dec 11 1992 14:59 | 90 |
| [Note: this is a shortened version of the previous long form that we are
planning to send to all members with the next quarterly mailing]
********************
* *
* DCU BOARD MEMO *
* * SUBJ: Summary of Bylaw changes:
* 11-DEC-1992 * Membership Bill of Rights
* *
********************
This board memo contains a summary of our proposed bylaw ammendments.
Because these changes affect membership rights, we are notifying the
full membership of our changes. The full text of the changes is long
but is available upon request from DCU. You may ask for the "Board Memo
dated 3-DEC-1992". We would like to encourage membership input on these
bylaw proposals, as well as others that are of interest to the
membership.
We have proposed changes to the bylaws to make the relationship between
the board of directors and the membership more equitable. These bylaw
changes will encourage more volunteer participation and ensure
membership rights are protected.
The proposed changes have passed a consensus vote by the board at the
November 1992 board meeting. We expect to formally vote the changes at
the December 1992 board meeting. However, for the changes to be in
force, the NCUA must also approve the changes.
The list of changes are as follows:
1) The term "president" in the bylaws would change to "chairperson" in
numerous places to prevent confusion between the duties of the CEO and
the chairperson of the board.
2) The bylaws would establish a process by which any member may propose
business for the annual meeting.
3) The bylaws would establish a process by which a member may cause DCU
related information to be mailed in a DCU quarterly mailing to the
membership at a reasonable price.
4) The bylaws would permit any member to make a recording of any annual
or special meeting of the members.
5) The bylaws would change the number of signatures required for a
petition candidate for the board of directors from 500 to 200.
6) The bylaws would not allow a member of the board by virtue of
appointment to run for a board position using the term "incumbent".
7) The bylaws would establish reasonable requirements on biographical
sketches for candidates for a position on the board.
8) The bylaws would restrict DCU employees from being elected to the
board or being active in a board of directors election to prevent
conflict of interest.
9) The bylaws would not allow the nomination committee to nominate
candidates who have served on the board of directors for at least two
full terms.
10) The bylaws would require that DCU make available the annual report
with auditor's notes prior to the board of directors election.
11) The bylaws would require that the minutes of the meetings of the
board (with the exception of redacted sections of the minutes recording
executive session business) be available for viewing by the members.
The minutes would also contain a record of how each board member voted
on each motion.
12) The bylaws would establish the Credit Appeals Committee for the
purpose of hearing appeals by members who have been denied loans by DCU.
The makeup of the committee would contain two volunteers and three DCU
employees.
13) The bylaws would allow the board of directors to change the
supervisory committee terms so that all terms would not expire at the
same time.
14) The bylaws would require a secret ballot vote for any motion to
remove any member of the board of directors or management.
15) The bylaws would establish an appeals process to the board of
directors for any member who has been denied access to any credit union
non-confidential record.
16) Certain bylaws would not be able to be changed except by a vote of
the membership at the next board of directors' election. These bylaws
deal with the rights of membership.
|
| 4.5 | Board Memo 7-DEC-1992, discuss in 630 | ESBLAB::KINZELMAN | Paul dtn223-2605 | Tue Dec 15 1992 14:28 | 45 |
|
********************
* DCU BOARD MEMO *
* * SUBJ: NOMINATING COMMITTEE AND THE
* 7-DEC-1992 * ELECTION PROCESS
********************
1993 DCU BOARD OF DIRECTOR'S ELECTION:
As outlined in the October issue of DCU's Quarterly newsletter, Network,
the DCU's 1993 Board of Director's Election preparations are underway.
NOMINATING COMMITTEE:
As Chairperson of DCU's Board, Lisa DeMauro Ross is responsible for
choosing members of the Election Nominating Committee at least 120 days
prior to the Annual Meeting. The following DCU members have been chosen
to serve on the 1993 DCU Board of Directors' Election Nominating Committee:
Karen Schlamp, Chairperson
Business Planning and Analysis Manager
Harold Pike
Program Manager for Multi Vendor Storage Solutions
Cindi Bloom
Mass Storage Organizational and Development Manager
PROSPECTIVE CANDIDATE INTERVIEWS:
All members who have submitted an application will be interviewed by the
Nominating Committee in Mid-December, 1992. Nominated Candidates will
be notified by December 16, 1992.
PETITION PROCESS:
The petition process will begin January 8, 1993 and run until February 8,
1993. Petition Candidates must be DCU members in good standing and are
required to collect 200 signatures from fellow DCU Members in order for his
or her name to appear on the ballot.
BALLOTS:
Ballots are expected to be mailed February 26, 1993 to all DCU primary
members at least 16 years of age. Ballots must be returned in the envelope
provided by 5:00 p.m., April 20, 1993. The 1993 Board of Director's
Election is supervised by O'Rourke & Clarke Accountancy Corporation.
Election results will be announced at the DCU's Annual Meeting scheduled to
be held at the Maynard Gun & Rod Club on April 29, 1993 at 5:30 p.m. We
invite all members to attend.
|
| 4.6 | Board Memo 15-DEC-1992, discuss in 631 | ESBLAB::KINZELMAN | Paul dtn223-2605 | Tue Dec 15 1992 14:31 | 142 |
| ********************
* DCU BOARD MEMO *
* * SUBJ: Investigation and
* 15-DEC-1992 * Litigation Status Update
********************
This board memo provides an update on the progress of the investigations
into the fraud against DCU and the Barnstable Credit Union.
INVESTIGATION UPDATE
The DCU board of directors has reviewed all of the investigations of
which it is aware, including ones commissioned by organizations
other than DCU. Because the investigations are confidential, we cannot
identify the investigations by name. DCU also conducted an internal
review as of October 21, 1992, and certain board members have examined
relevant internal DCU records. The data that was reviewed does not
suggest that any member of last year's board was involved in the fraudulent
activities leading to Mr. Mangone's dismissal.
Members have asked whether it might be possible to collect on DCU's
directors and officers liability policy on the basis of breach of
fiduciary responsibility. (If a director or employee violates the
conditions of the policy and causes a loss to DCU, the insurance
company pays DCU for the loss up to the limit of the policy. In our
case the limit is $3 million.)
The web of litigation involving the fraud is complex and interrelated.
Altering one part would affect all of the other parts. Furthermore, if
DCU were to sue last year's board, DCU would have to pay the full
litigation cost and run the risk of gaining nothing. Under all the
relevant circumstances, and because last year's board was not involved
in the fraudulent scheme, we have concluded that the cost and risk of
litigation is not warranted. In addition, the previous board's defense
would be paid for out of the same policy, thus, any recovery to the
credit union would be limited.
ACCOUNTING OF PARTICIPATION LOAN LOSS (updated as of October 31, 1992)
Participation loans involved one institution, the Barnstable Credit
Union, underwriting a loan and another institution, the DCU, funding a
portion of that loan. The known losses incurred by DCU due to the
Participation Loans were all written off in fiscal year 1991. The
financial impact of those losses are behind us. We do not anticipate
any additional losses either in the current or future fiscal years.
(ALL LOSSES WRITTEN OFF IN FY91)
$K's 31-DEC-1991 31-OCT-1992
Losses, Expenses & Potential Exposure
Related to the Fraud $19,599 $19,295
Less: Estimated Net Realizable Property Value $ 1,467 $ 1,863
Less: Bond Recovery $ 6,000 $ 6,000
------- -------
Net Loss Related to the Fraud $12,132 $11,432
In order to facilitate DCU's recovery plan following discovery of the fraud,
DCU adopted a conservative financial treatment of the participation loans,
with all loan losses written off in fiscal year 1991. As a result of this
conservative posture, the DCU has realized gains of $255K on the sales
of properties that had been previously written down. In addition, we have
a favorable variance of $445K against the initial estimates for related
expenses. Of the fifteen original properties, six remain on the books
pending sale.
LITIGATION STATUS UPDATE
Regarding the Barnstable Credit Union losses, the National Credit Union
Association (NCUA), the federal agency that regulates credit unions, is
currently suing Richard Mangone and others for approximately $37M. The
NCUA is requesting a "summary judgment" against the defendants for
approximately $19M. (A summary judgment is a judge's ruling, previous
to a trial, stating that the judge feels that the evidence is so
overwhelming that judgment (partial or total) should be made before any
trial occurs.)
However, there is no guarantee that DCU would receive any money recovered
in this suit. Money would most likely be awarded to the NCUSIF which
covered Barnstable's losses. NCUSIF did not cover any losses related to
DCU (DCU covered its own losses). (The National Credit Union Share
Insurance Fund (NCUSIF) is similar to the FDIC insurance fund for banks,
but NCUSIF is funded directly by credit unions.)
DCU has already collected against a $6M fidelity bond on Richard
Mangone, former president of the DCU. DCU has a suit pending against
Mangone and others to recover damages to DCU from the participation loan
fraud.
Richard Mangone and others were criminally indicted by the US attorney
on 43 counts as noted in the last copy of DCU's Network newsletter.
Although the US Attorney asked for a bond of $500K, currently Mangone is
free on a $50K bond. Mangone will also likely face criminal contempt
charges for allegedly overspending his $8K per month limit set by the
court in connection with the appointment of a receiver to oversee
Mangone's affairs.
Mangone stated he has few assets in addition to his house. DCU has
offered a reward for information leading to the recovery of further
assets (see the last issue of the Network Newsletter for the exact terms
of DCU's reward).
The criminal case is currently scheduled for March of 1993, although
this could be delayed. The US Attorney requested but failed to obtain
a stay against the NCUA suit and the DCU suit to prevent these suits from
being heard. Because the strategies for both the civil suits and criminal
case are similar, the US Attorney wanted the criminal case to be heard
first so that the civil litigation would not prejudice the criminal
prosecution.
DCU is also seriously considering initiating a suit against the former
auditors, KPMG Peat Marwick. This action would likely be commenced
jointly with other interested parties. If filed jointly, the litigation
cost and any recovery would be split.
Richard Mangone has a claim against DCU for attaching to Mangone's
retirement fund (approximately $200K) in a DCU account. This action, in
light of all the other circumstances, is not likely to result in any
liability to DCU.
FOR FURTHER INFORMATION
There are a number of court documents in the public domain and DCU would
like to encourage interested members to view the documents. Because the
documents consist of hundreds of pages we cannot make copies for
individual members for free. However we will make them available for
viewing during normal business hours at headquarters and at requested
branches.
The following list identifies the documents that are available. If you
are interested in viewing the documents at a branch, just call DCU
headquarters and request that a copy of the desired report be forwarded
to the branch. If you do not have branch access, you may request a
copy of a suit summary or may request a complete copy of any document
by paying the copying and mailing cost.
1. US Attorney's criminal indictment against Mangone and others....$4.
2. NCUA suit against Mangone and others ...........................10.
3. NCUA motion for summary judgment on the above suit ..............2.
4. NCUA proposed summary judgment statement ........................1.
5. DCU suit against Richard Mangone and others......................3.
6. Mangone's claim against DCU......................................2.
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| 4.7 | Treasurer's report March 1, 1993 | PLOUGH::KINZELMAN | Paul dtn223-2605 | Wed Apr 07 1993 12:44 | 62 |
|
DCU BOARD MEMO
MARCH 1, 1993
TREASURER'S REPORT
Despite the weak economic climate and work force reduction by
our sponsor company, Digital Equipment Corporation, 1992
proved to be a successful year for Digital Employees' Federal
Credit Union (DCU) with record setting earnings of $4,897,004.
As a result, DCU's Gross Capital to Assets Ratio, a measure of
financial soundness, rose to 4.82%. Our success allowed DCU
to achieve its primary financial objective to build capital
reserves so that we maintain financial soundness and protect
the credit union from unforeseen losses.
DCU's total assets grew slightly in 1992 totaling $360 million
by year end. Loans to members increased at an unprecedented
rate. During 1992, we made 8,474 consumer and real estate
loans totaling $181.7 million. Of this amount, 7,146 were
consumer loans equaling $42.6 million and 1,328 were real
estate loans in the amount of $139.1 million. Real estate
loans held in our portfolio declined during the year because
DCU sold the majority of thirty-year fixed rate loans granted.
Our approval rate for both real estate and consumer loans was
over 80%.
The credit union experience its second straight year of
negative savings growth. This decline is attributed to
sponsor cut-backs and a low interest rate environment. The
low interest rate environment resulted in members shifting
from certificates of deposit to more liquid accounts.
Certificates of deposit declined by $28.1 million while shares
and money market account balances increased by $26.2 million
during the year.
Gross income for the year totaled $31.4 million. Interest on
loans to members accounted for more than two thirds (67.7%)
while investments and other sources contributed 19.0% and
13.3%, respectively. Cost of funds or dividend expense
accounts for $12.5 million or 39.8% of gross income. The
remaining portion covered operating expenses and additions to
our reserve accounts.
We are pleased with our performance in the first year of the
Board and Management Team. As DCU moves forward into the
'90s, the Board of Directors will continue to build capital
reserves and focus on safety and soundness while continuing to
meet your family's changing financial needs.
Sincerely,
Tanya L. Dawkins
Treasurer
* A copy of the audited financials will be available by
mid-April in the 1992 Annual Report.
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| 4.8 | DCU BOARD MEMO - DCU PRICING POLICY | LEDS::ROSS | | Mon Sep 20 1993 10:54 | 72 |
| FROM: DCU BOARD OF DIRECTORS
TO: DCU MEMBERSHIP
SUBJ: BOARD MEMO - DCU PRICING POLICY
DATE: SEPTEMBER 1993
Over the past 18 months, we, the Board of Directors, have mandated the
improvements required to turn around DCU. These improvements focus on
financial soundness, competitive product offerings and improved delivery
systems to better serve the entire membership. In addition, our long-term
plan is to increase member's savings and borrowing by continuing to offer
"better" than competitive rates. The Board believes that the improvements
made over the past 18 months encourage members to support the credit union.
Our credit union is a COOPERATIVE. And, by definition, prospers when its
members participate and contribute by saving and borrowing with DCU.
Given Digital Equipment Corporation's Work Force Reduction Plan, the future
of the credit union is dependent on our current membership. A study of our
membership demographics causes us to conclude that many of our members are
using DCU for convenient free services but are using other institutions for
their borrowing and savings needs. The members who are borrowing from and
saving at DCU are subsidizing those who are exclusively using DCU for its free
services. The data we reviewed included such information as:
- On average, members are between the ages of 37 to 44
- On average, our membership's household income is $65,000 annually
- Of our 46,000 checking accounts, 7,600 or 16.5% have less than $10 in them
Further, the data underscores that low-balance accounts and low-balance loans
cost the rest of the membership $2.5M annually. If there was equity across
the membership, where all members contributed to the success of the credit
union, the $2.5M in expense would instead come back to all of us in the form
of better rates, improved operations, more programs and an improved capital
ratio.
In April the Board was asked - "Based on the Philosophy of a COOPERATIVE,
is it fair for any one member to subsidize another member?" A majority of
the board voted for fairness. As a result of this decision, a pricing program
and fee structure was developed and will be implemented in January.
The purpose behind this policy is two-fold:
THE CARROT -
The first reason for the pricing structure is tied into the concept of
"Relationship Pricing". In principal, the more services you use with
us, the less expensive it becomes. First, and most directly, fees are
waived. Second, as more members expand the services they use, the
more successful the institution becomes and the greater flexibility DCU
has in offering more competitive rates and programs.
THE STICK -
Secondly, we have to stop inappropriate account usage. Members have to
make a CHOICE - are they committed to the economic success of the COOPERATIVE
and the other members who own it? We believe the new pricing gives anyone
who is genuinely interested in being a member of the COOPERATIVE a number
of options to avoid fees.
In conclusion, the turnaround of the credit union is complete and we need
to focus on the changes necessary to ensure DCU's long-term success. A
credit union is a COOPERATIVE and is dependent on equity and the economic
participation of its members. The pricing changes, to be implemented in
January, are designed to create an incentive for members to save and/or
borrow with DCU and to ensure fairness for the entire membership.
This policy decision was voted at the April Board Meeting. The vote was
not unanimous. Majority in favor, 5 to 2. On September 22, the unredacted
minutes for the April 27 Board Meeting will be available in DCU Conference
Notes and at the branches. The decision to redact this information until
September 22 was made to allow time for the development of the relationship
pricing program by the DCU Management, the training of DCU staff and the
announcement to the entire membership.
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| 4.9 | BOARD MEMO: Membership Trends and Bonus Dividend | LEDS::ROSS | | Fri Feb 25 1994 09:37 | 147 |
|
BOARD MEMO
Membership Trends and Bonus Dividend
Last month, information was published on VaxNotes relating to
1993 membership trends and a Board vote on proposed bonus
dividends. The released information included membership data
for the period of April through December 1993 and the
individual Board of Directors' votes on the bonus dividend
issue. Since this information was incomplete and out of
context, the DCU Board of Directors is providing the following
memo to answer your questions and concerns regarding these
issues.
1993 MEMBERSHIP TRENDS
DCU membership trends were posted on VaxNotes as shown below:
---1993--- Members Change
April 83,975
May 83,856 - 119
June 83,858 + 2
July 83,789 - 69
August 83,671 - 118
September 76,011 -7660
October 75,626 - 385
November 75,223 - 403
December 74,053 -1170
Total -9922
As explained at the Board meeting, when this information was
presented, there were three primary reasons that explain the
large drop in membership during the last few months of 1993.
Excluding these three reasons, there was a relatively small
decline in the number of members in 1993. Beginning in
February 1994, DCU will conduct an ongoing monthly survey of
all closed memberships and checking accounts. A summary of
the reasons for the large drop in 1993 are as follows:
Accounts with less than $5.00/Clean-Up 8,253
This category represents members who had inactive savings
accounts with less than $5.00 and had no other accounts, loans
or services. In order to ensure that members wanted their
accounts closed, we sent a letter encouraging reinstatement of
membership. Members authorized closing the majority of these
accounts; however, credit union procedure in the past did not
result in the account being removed from our database. This
process was corrected in September 1993.
Abandoned Property/Escheat Accounts 752
Any funds on which there has been no activity for three (3)
years are considered abandoned and must be escheated or
remitted to the Commonwealth of Massachusetts on November 1st.
Activity is defined as: member initiated transactions (this
excludes normal dividend postings) or written correspondence
to DCU from a member concerning their membership. Prior to
sending any funds to the Commonwealth, DCU notifies the
members encouraging them to reactivate their accounts. If we
do not hear from the member, we must send the funds to the
Commonwealth and close the membership as is legally required.
The number of members who reactivated their accounts was 786,
and the remaining accounts were closed in December.
Dormant Accounts 519
Any funds on which there has been no activity for two (2)
years are considered dormant. Activity is defined as: member
initiated transactions (this excludes normal dividend
postings) or written correspondence to DCU from a member
concerning their membership. Annually, in October, DCU
notifies members of their dormant status and encourages them
to reactivate their membership. This year, DCU sent out 3,440
letters and 519 members requested that their membership be
closed.
BONUS DIVIDENDS
A bonus dividend is a distribution of excess capital that is
declared as an additional dividend for regular savings
accounts. Capital consists of reserves and undivided
earnings. The functions of capital are to:
o Help the institution continue operating during low
earnings periods.
o Act as a cushion for absorbing unexpected losses.
o Provide the funding for new services, expansion,
etc.
o Meet regulatory guidelines.
o Provide no cost earnings base.
Overall, credit unions are the best capitalized of all
financial institutions with an average ratio of 8.5%. The
need for capital varies among different credit unions due to
competitive economic and business factors that impact the
execution of business strategies. At the 1993 Planning
Conference, your Board set an eventual goal to raise the
credit union's capital ratio to at least the industry average.
Because DCU had excellent profits in 1993, it was proposed, at
the January Board meeting, that the Board consider declaring a
bonus dividend. The Board discussed the merits of this idea,
but rejected a bonus dividend, by a vote of five to two, for
the following reasons:
Excess Capital Does Not Exist - It is important to distinguish
between annual profits and capital. A credit union can have
an outstanding year from a profit standpoint, but still needs
to build capital. This was the case for DCU in 1993. DCU's
capital ratio has improved substantially from a low 3.4% as of
December 31, 1991, to 6.5% as of year end 1993. The current
Board of Directors has been commended for the credit union's
progress in this area by our independent auditors and
examiners, who agree with the majority of the Board that our
capital needs to continue to grow.
No Fair Way of Distribution - Any distribution of excess funds
in the form of a bonus dividend for regular shares is unfair
to the borrowers of the credit union. Also, a regular share
bonus dividend would not benefit members who hold most of
their funds in CDs, IRAs or Money Market Accounts. In today's
competitive environment, the vast majority of credit unions
find it better to offer the best loan and savings rates they
can afford throughout the year rather than declare a bonus
dividend at year end. In this way, members also benefit by
having the dividend funds earlier.
Capital Improves the Competitive Position of a Credit Union -
If DCU declared a bonus dividend, it would reduce our
competitive position. Capital represents funds that can be
lent out to the members or invested but does not require a
dividend to be paid on those funds. As a result, a
well-capitalized credit union can be much more competitive in
providing services, setting loan and savings rates and
offering new investment vehicles. Again, borrowers and savers
both benefit.
The Board had a healthy debate on this topic, as you will see
when the minutes are made available to the membership. The
majority of the Board believes that DCU needs to continue to
offer competitive loan and savings rates and accumulate
capital.
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