First Basin Suspends Conversion Balloting But May Try Again

ODESSA, Texas — The $113.6 million First Basin Credit Union is going to remain a credit union, at least for now. The credit union has announced to its members that it has decided to "suspend" the application to convert to a bank charter. In an undated letter to members, the CU alleged that some of its members have been receiving calls telling them that they would lose money on deposit if they didn't vote against the conversion and urged members to come forward if they were called. "[It] has come to our attention that our members have been receiving calls telling them that if they don’t vote against the conversion proposal they will lose their money on deposit at First Basin and their accounts will be closed," First Basin CEO Shem Culpepper wrote. "This is absolutely false…If you were contacted by individuals urging you to vote no and making similar types of claims, please contact us immediately so that we may ensure your rights were not violated," he added. The credit union has not responded to a request for an interview about these allegations or about how many members may have complained about being called. But in the local media, Culpepper said the CU was "investigating" whether or not any CU member information had been "improperly disseminated".
But Letty Moreno, one of the women who organized the Save First Basin members group opposing the conversion attempt, doubted the CU's assertion.
"We didn't call anybody," Moreno said. "They were calling members urging them to vote for the conversion. We didn't even have anyone's address, much less their phone numbers. " Also in a local media story, Moreno pointed out that Culpepper's allegation suggested some serious gaps in the CU's security.
"It's ridiculous," Moreno said of the charge. "How can you stand there and say that somebody possibly stole information. What does that say about your organization?" Reaction among members to the news has generally been a mixture of relief that First Basin will remain a credit union, but also anger that the CU has suspended the balloting.
"Canceling the vote a week before the ballot box closes is a mockery of member democracy. It sounds like a move straight out of old Mayor Daley's Chicago playbook," said Randy Chambers, chief financial officer for the $292 million Self-Help Credit Union and a founding member of the National Center For Member Trust. NCMT is an organization that opposes credit union-to-bank charter changes and partially supported the Save First Basin effort.
Chambers voiced an opinion similar to members of the credit union who believed their effort to oppose the conversion had been working and that the CU should have allowed the balloting to continue to make the victory clear.
"How can the board spend over a half million dollars of member money to promote conversion, and then suspend the election at the last minute, without even telling members the results of their vote?" Chambers asked. "It sounds to me like the members have spoken and voted to remain a credit union. Instead First Basin's board wants to take their ball and go home, and come back another day when they might have a better chance of winning. " Chambers' statement alluded to a hint in Culpepper's letter that the credit union might come back to members again with a modified proposal designed to gain more member support. In particular Culpepper mentioned making a commitment to keep the credit union's "one member, one vote " voting standard following any conversion (an approach that other CUs seeking to convert have also adopted to make the transaction more palatable to CU members), and the possibility of returning some of the CU's equity to the members as part of the deal. "
The board wants to evaluate whether it can reward members for First Basin's recent success by returning a portion of First Basin's net worth to you," Culpepper wrote. "This would result in a cash payment to all eligible members upon conversion. The board also wants to consider retaining our one member, one vote structure."
Members reacted strongly to this part of Culpepper's message. "Don't buy the bribe," urged the Save First Basin Web site ( http://savefirstbasin.com/index.asp). "If First Basin has enough money to pay members a special dividend, why don't they do it right now? After all, that money already belongs to us, the member-owners of the credit union. It's just not honest to hold that money out as a bribe instead."
Chambers echoed the members' comments. "For First Basin to dangle a special dividend only if members approve conversion doesn't pass the sniff test," he said. "If they have enough capital to pay a bonus dividend, why don't they go ahead and reward their members now? It already belongs to the members! Instead, they suggest spending another half million dollars on lawyers, phone banks and member mailings just to get to a potential payout to induce members to support a conversion the next time around? Doesn’t sound like such good stewardship of the members' money," he observed.
Culpepper's letter and the reluctance of the CU to reveal the results of the balloting, at least as of when the voting was stopped, seems to indicate this might be heading to another board fight, as similar failed efforts have done as well. But as of press time it was unclear whether the members will begin to petition for a special meeting at which the board members can recall board members or whether they will instead seek to replace board members in regular elections. " If the Board is not willing to represent the members, they should step down or the members will go about replacing them," wrote Armando Rodriguez, a First Basin CU member, in a letter to a local paper about the conversion.
—dmorrison@cutimes.com