SAN JOSE, Calif.-The $1.6-billion Technology Credit Union is offering a number or prizes to encourage members to cast their vote as part of its effort to convert to a mutual savings bank.
Technology CU is reportedly offering members prizes that include four iPad 2s and more than $15,000 in cash prizes to vote. Twenty six prizes will be awarded. Approval of the conversion requires only a majority of voters, not a majority of members.
At least one member has publicly reached out to various media and trade associations to express his anger at the prizes for voting, along with the conversion itself.
In its latest materials, Technology CU said it needs to convert in order to offer a "full range of innovative products and services" and to maintain its "competitive pricing on deposit products, and low rates and fees."
The California Department of Financial Institutions did not provide comment by presstime on any issues related to offering such prizes in charter conversion votes.
Meanwhile, a spokesperson for Technology CU issued a statement to Credit Union Journal by e-mail.
"Please know that all of our disclosure materials, as well as the methods and procedures applicable to the membership vote, including the use of prizes to encourage participation by our members, are in compliance with regulatory requirements," the spokesperson said. "In fact, all materials were filed with and cleared by the NCUA for use prior to our distributing them to our members."
The Tech CU spokesperson said giving away prizes for participating in the voting process has been used by other credit unions in similar transactions, because member participation is historically low, "and is not very different than that used by many credit unions regularly to encourage attendance at annual membership meetings."
Member Reaches Out To Media
Meanwhile, Robert Marinace, a member of the credit union, was contacting media last week expressing his displeasure at the conversion and the potential windfall via stock options for management and directors should Technology Credit Union convert to a mutual savings bank and then later convert to a stock-based institution.
Marinace, a TCU member since 1978, said several elements of a packet he received from the credit union have sparked his ire, and led him to review the history of CU-to-bank conversions. Some 35 CUs have converted to MSBs and, of those, 23 eventually became stock institutions.
"If I wanted to be part of a bank, I would go to a bank," he told Credit Union Journal. "But I am a member of a credit union and have been for a long time. You get better rates from credit union. I am against this change because I like the credit union concept, and now that I know the people who are running the credit union are going to make a killing I'm really upset. I want my fellow members to know what I know."
Marinace called the prize offers a "blatant attempt to snag the member who is too busy and not paying attention to vote for the proposal" just because the board of directors encourages it. He fears some members may vote yes because they think such an action might increase their chances of winning a prize.
League Takes No Position
The California and Nevada CU Leagues continues to remain neutral in the matter. League President Diana Dykstra said the role of the league is not to "persuade" the membership one way or another.
"It is up to the credit union and its membership to decide what is in its best interests," she said. "Our role is one of transparency. If we are contacted by a credit union or a credit union member we make sure they have all the information available to them."
Henry Kertman, spokesman for the two leagues, said the CCUL/NCUL believe the member-owned, not-for-profit charter "presents the best option for providing consumers with high-quality, affordable financial products and services."
"As part of that league position, when considering a conversion the best interests of a credit union's members must be foremost," he said. "We know one reason credit unions may consider conversion is frustration with the cap on member business lending, as well as other regulatory burdens. Because of this, the leagues and CUNA are working to provide legislative and regulatory relief at both the state and national levels."
In the case of Technology CU's conversion bid, Kertman said approval is required by the majority of those members who actually vote, not the credit union's entire membership.
'All About Greed'
Marinace said he would like to "level the playing field" and pass along information about the significance of future stock options, but Technology CU included a provision in the conversion packet stating: "Any member wishing to provide such comments must agree to reimburse Tech CU for the costs of transmitting the comments to other members, including an advance payment to cover the expense to transmit such comments."
With 72,686 members eligible to vote, Marinace estimated it would cost him more than $100,000 in printing and mailing to convey his comments to all members.
"There is no question in my mind it is all about greed," Marinace declared. "They make statements about expanding territory or services, but it is all bogus. It is all about getting this first vote, then a couple years later there will be a second vote to become a stock institution, and there will be a super payoff later. Issuing stock will not benefit the average member."
As part of the conversion bid, Technology CU will send three mailings to members.