Slight of Hand, Part 2

THINGS AREN'T ALWAYS 

SEEM WHAT THEY APPEAR TO BEA

After spending all of 2009 immersed in the RED, Priority One Credit Union has finally re-entered the BLACK. This is certainly good news and so unexpected. 

According to the January Monthly Income Statement, the credit union actually generated real profit. The financial disclosures referenced in the Monthly Income Statements reveal the credit union generated profit during the first month of the new year. Of course, one shouldn't ignore the fact that Priority One ended 2009, in the negative. During the first week of January, it was this the credit union's failure to escape the negative the prompted the angry President Charles R. Wiggington., Sr. to angrily exclaim, he was not going to make the December Monthly Income Statement public. Of course, he changed his mind after being reminded that his refusal to post statements in early 2009, resulted in the filing of two complaints to the DFI. 

What we find perplexing is that after 12 consecutive months, Priority One generated profit. 

December's Monthly Income Statement references losses of -$5,458,432. Not only did they allegedly generate profit, but they did so in what is historically one of the slowest months of the year. How is that possible? 

Because President Wiggington has spent the last three years fabricating lie after lie trying to cover-up his failures, we find it incredible that suddenly, profit has been produced. During the month of January, the Loan Department complained that sales were extremely slow, prompting the President to dispense orders that every Loan Processor and Officer expend more time contacting members whose requests for loans have been approved and try to persuade them to fund their requests. The Business Development Department also reported sluggish sales.

We will be keeping an eye on the credit union's financials as we know all too well that Charles R. Wiggington, Sr. is a President with a proclivity to alter reporting. In fact, last year the President ostracized, CFO, Manny Gaitmaitan, because of his refusal to "cook the books" and show profits where none exist and reduce reported losses. This is a President who is less concerned with creating effective strategies and introducing proactive measures to reduces losses than he is in creating fraudulent impressions of success..  

More on this, later in this post. 

FIGUREHEAD

As we've reported in recent posts, more and more of President Wiggington's decision-making authority regarding the development of products, services, and promotions has been transferred to COO, Beatrice Walker. The President who for years flaunted his authority, seems to be evolving into a figurehead. The fact that it is a decision he doesn't agree with is most attested to by his demeanor which is quieter. What's more, he looks miserable. 

The COO has also changed. She is cockier, more arrogant and has made it a habit to walk through the entire South Pasadena branch, several times each day, in company of her clique, Director of Credit Resolutions, Yvonne Boutte, and Loan Manager, Call Center Supervisor, Credit Manager, Joseph Garcia. While strolling through the branch's various departments, she will loudly talk about the changes she intends to make when she is appointed President. During her many walks through the branch, she's been overheard talking about her plans to retire AVP, Rodger Smock, who she frequently describes as "useless" and "overpaid" and her plans to terminate, Education and Training Manager, Robert West, who she describes as "unnecessary." 

The products she's plagiarized and implemented, have been met with lukewarm interest though her spending has been astronomical. The Board has continually approved  her requests for more and more money used to develop products, used to create the call center and used to hire consultants because she promises that the monies spent are actually an investment that will eventually reap high returns. 

Currently, she has entered into a wild refurbishment of the main branch, installing window treatments, painting, and is planning to re-carpet the entire branch. She has also purchased more cubicles which will be installed alongside the call center and collection department. She is also sprucing up the President's office. Several weeks ago, purchased a new $5000 laptop. The procedures is to submit a request to the IT Department who will review and approve or deny the request. If approved, the department will order the laptop. Mrs. Walker charged the laptop which she selected and picked up from a store and then instructed the IT Supervisor to process payment for her computer. He refused. 

Ms. Walker might do well to acquaint herself with the credit union's revamped Mission Statement which describes the credit union as a financial fitness center. When one considers that 2008 and 2009 both ended in the negative, one might have thought that the Chief Operations Officer might have acted more conservatively and spent a lot less until it is proven her efforts are actually producing profit. Ms. Walker is evidently assuming that all that she does is going to bring in huge amounts of profit sometime in the near future. For her sake, let's hope so. 

STREAMS OF INCOME

Last June, AVP, Rodger Smock, declared that one of COO, Beatrice Walker's competencies was to create products and services that generate income. We've investigated her past employment and have found no evidence to this and have to wonder what the AVP based his statements on. 

As we've reported previously, Ms. Walker has plagiarized ideas from acquaintances in the industry. The launching of Priority Pay just a few weeks ago, proved a fiasco when she failed to confirm that the invitations sent to members included the customary Disclosure Statement and Fee Schedule. 

She as described her new call center as a "one-stop call center" and we certainly hope that in time, the center will live up to the hype. In the meantime, we've decided to briefly describe some of the key products launched by Ms. Walker which the Board claims, will provide profitable sources of income. . 

SKIP-A-PAY

Ms. Walker revealed several weeks ago that Skip-a-Pay was an idea provided to her by an acquaintance in the industry. The premise of the product is, you can skip paying your consumer loan premium for an entire month and use the money to splurge on something else, like a vacation. 

Realistically, Skip-a-Pay will only help a person whose monthly loan payment is relatively high. We can't imagine someone using a $55 monthly payment to travel. This past December, Ms. Walker disclosed that Skip-a-Pay generated $12,960 in profit to the credit union. We disagree.

The program cost $50,000 to design and implement so by our calculations, a profit has not been made. According to the COO, Skip-a-Pay will only be offered once per year. Based on her statement, it may take four or five years for the product to actually prove profitable. Based on Ms. Walker's disclosure, the credit union needs to generate another $38,034 before profits can be gained for the offering.  

PRIORITY PAY

The credit union's version of a payday loan was launched with little fanfare. We previously reported that the product has received a lukewarm response, but we may have been wrong in our assessment. 

According to Loan Department personnel, members have shunned Priority Pay. A number of members who were surveyed said they don't want the credit union "involved" in their "personal business." So is Priority Pay intrusive? Apparently some members think it is. 

As mentioned in our last post, Priority Pay charges a flat monthly fee of $59.00, no matter what amount is borrowed. On the surface, that seems like a fair deal. 

However, what the credit union fails to mention is that obtaining a loan through Priority Pay is a membership based program which means members will continue to be charged $59.00 per month irrelevant of whether or not they've borrowed money. Members may opt out of the program but what one has to again question is the integrity of a credit union who is not telling members up front, about the required monthly $59.00 fee.

Furthermore, the money is not be lent by Priority One Credit Union but by a third-party lender. Priority One receives a payment for each member who obtained a Priority Pay Loan. We believe this product will fail. 

Courtesy Pay

This is another product "borrowed" by Ms. Walker from acquaintances in the industry. Courtesy Pay is another name for overdraft protection.  Whether the product is an actual courtesy is all dependent on the user. 

Like Priority Pay, the program encountered immediate problems at the point of its inception, though the problems afflicting Priority Pay stem from COO, Beatrice Walker's dishonesty.

Courtesy Pay was to be offered to only members in good-standing who have a checking account. Ms. Walker instead, ordered that all member accounts be coded for Courtesy Pay. What this means is, that if a member overdraws the account linked to Courtesy Pay, they will, unbeknownst to the member, incur an overdraft fee. The reason why she did this is clear - to generate increased revenue for the financially-strapped credit union.

Courtesy Pay charges a flat fee of $28.00 irrelevant of the amount that was overdrawn. This means that if a person writes a check for $200.00 but doesn't have the funds to cover the amount, they will be charged $28.00. 

However, this also means that if a person writes a check for $10.00 but only has $9.00 in their checking account, will be charged $28.00. Is this how Priority One is proving to be a financial fitness center?  Is this how it's helping members and employees "win with money"? 

Last December, Ms. Walker informed the Board that Courtesy Pay "will generate more income from fees charged to members and enhance service." Yes, it will gouge members. Inarguably, the credit union is in desperate need of money due to the horrendous business decisions made by President Wiggington and being repeated by Ms. Walker. Instead of targeting the cause of losses, Ms. Walker it going to charge members extra fees to help extricate the credit union from the chasm created by the President and sanctioned by the President. 

In her article, “OVERDRAFT PROTECTION: Big Business or Big Headache, Dianne Molvig presents the pros and cons of overdraft fees. Included with her article, was an account from Gary Perez, CEO of USC Credit Union, and his credit union's decision not to implement a version of Courtesy Pay. Mr. Perez states, "My sense is they [members - students and their parents] would prefer we say no to their Happy Meal as opposed to charging them $30 for it.” 

Ms. Walker on the other had,  chooses to charge exorbitant overdraft protection fees which create a cycle of debt when the role of all credit unions should be to teach members into adopting sound financial practices that protect their assets and help  them grow.  Mr. Perez also state:

“We didn’t want to put our members – especially our young members at risk of incurring heavy overdraft fees in exchange for common, ordinary debit card activities.” Rather than providing overdraft protection on checks and ACH (Automatic Clearing House), they chose to avoid levying NSF fees and instead have encouraged members to enroll in an open-end overdraft line of credit which does not charge a fee for transfers and a “nominal interest rate” of 9% to 15%, dependent upon their disclosed credit standing. The (vendors) position was, ‘Why would you do that? Just give it to everyone. You maximize earnings from fees and you help the most members.’ We agreed it would maximize earnings. We disagreed with their definition of ‘help’.”

APATHY

A member recently contacted us and shared her experience with Priority One Credit Union after she discovered money had been withdrawn from her checking account without her authorization. 

A few weeks ago, the member discovered that $400.00 had been debited from her checking account using her Priority One VISA check card. She immediately called the Member Services Department in South Pasadena and they appropriately canceled her check card. 

The member asked that the credit union grant provisional credit which would restore the amount of the money taken from her account. She was told her request would be approved and the money restored to her account by the end of the week.  

She continued to monitor her checking account but by the end of the week, the money had not been credited to her account. Her frustration increased when messages left for the Financial Services Representative who she reported the theft to, refused to response to any of her voicemails. 

Frustrated, she instead called the Los Angeles branch.  The representative at the Los Angeles office called the main branch in South Pasadena and later, that same day, the member was called by Credit Resolutions Manager, Yvonne Boutte. Mrs. Boutte apologized for the inconvenience but informed the member that in the future, she refrain from calling other branches. But hadn't the member called the South Pasadena branch and left voicemails that were never responded to? 

Mrs. Boutte suffers from the same ailments afflicting most of Priority One's executive and managerial sector. Mrs. Boutte's response to the member's concerns was inappropriate and completely off-target.  Was the credit union's refusal to respond to the member and Mrs. Boutte's unsuitable response evidence that Priority One is a financial fitness center or how it helps member's win with money? 

By the way, the member was charged $50.00 by Priority One for its alleged research conducted during investigation of the theft.  Did someone say, Financial Fitness Center?

DOUBTS

Though Priority One has recently disclosed that profit was generated this past January, in late December 2009, President Wiggington offered up the following address to the Board of Directors:

“The credit union continues to face many challenges. Our net capital decreased from 7.12% to 6.78%. The credit union’s allowance for loan loss account had to be increased by $370.829.00 and is now adequately funded. The increase was due to the credit union being under funded by $413,307.00 for the month of November (2009) and the 6 months net charge-offs increasing by $525,763.00. 

Every effort is being made to control delinquencies; however, we currently have $2,867,067.19 in delinquent mortgages, which represents 69% of our total delinquency. Our modified mortgages represent 61% of our delinquent mortgages. In future, the credit union will be reporting to the board every month on potential charge-offs covering a 3 to 6 month period. 


Loans decreased by $1,225,013.96 and shares decreased by $2,255,468.53. Our total membership increased by 41 (new members).”

As stated previously in this post, we have doubts regarding the credit union's reported profits for the month of January. It's incredulous to believe that in December 2009, Priority One was deeply mired in the negative and despite the President's depressing disclosures, Priority One somehow and inexplicably, generated sufficient profit to push the credit union into the Black. 

The news of profits generated during the month of January 2009 also seems starkly inconsistent with statements made by Real Estate and Consumer Loan Manager, Joseph Garcia, who warned his staff that unless more loans are funded, the credit union will have no choice but to lay-off staff. 

We advice taking any proclamations of profit with a grain of salt.  

THE TRUTH

The credit union reported profits of $230,000 for the month of January 2010 and according to both the President and COO, the profit was gotten from increased business. So is the money the result of increased new business? 

According to Priority One's December 2009 Monthly Income Statement, the credit union increased its Loan Allowance needed to cover potential loan losses, from $2,600,000 to $2,970,829.00. This was an increase of $370,829. 

During the month of January 2010, the credit union only used $2,593,983 of the $2,970,829.00 to cover loan losses.  This left an unused balance of $386,846. What it appears the President and COO did was take a portion of the unused loan loss allowance and fraudulently report it as profit for the month of January 2010. This would explain why following an entire year of losses, the credit union would suddenly, almost miraculously, experience profit during one of the slowest months of the year. 

It is important to also note that at no time during the years of 2007, 2008, and 2009, did the credit union experience profit in that amount until after CFO, Manny Gaitmaitan, was forced to resign by the President and COO, for refusing to alter the credit union's monthly financials. His expulsion at the end of 2009, finally provided the President and COO with the ability to falsify financial reporting. 

January's alleged profit was not based on the result of profits attained from sound strategic planning but rather the result of manipulating financial reporting. 

WE WERE HEARD

In response to our reporting the credit union has moved quickly to try and reduce its high number of dropped calls (members than hang-up before their call is answered). In fact, in her December address to the Board, COO, Beatrice Walker wrote:

“Currently, we are answering approximately 900 calls per week and losing approximately 200 calls per week.” 

That’s more than a 20% loss of all incoming calls. Concerned about their increasing negative public reputation, the credit union has now ordered that incoming calls to the Call Center be also diverted to the South Pasadena reception desk and the Valencia branch. But didn't the President and COO declare throughout late 2009, that the staff assigned to the call center would be able to answer all incoming calls and thus resolve a large percentage of Priority One's immense member service issues? 

This serves as yet another example of how President Wiggington is "working smarter" (his words, not ours). 

In 2009, President Wiggington spent $600,000 of credit union monies to purchase a new telephone system that has been plagued by continual technical difficulties, forcing the credit union to spend immense amounts each month on technicians, none of who has succeeded in bringing a stop to the frequently occurring technical issues. 

At the time the system was installed, the President ordered all calls diverted to the south Pasadena branch and any overflow, sent to the Los Angeles branch. It never occurred to the self-described :"educated" President to have calls equally diverted to all branches, not just two. 

In 2009, it became apparent that the $600,000 spent on the phone system had not only failed to resolve Priority One's many member service related problems but had actually exacerbated these. 

And so, the President and COO, Beatrice Walker, decided that the solution would be installation of a call center that the COO said would serve as a "one stop call center." So as of January 2010 and according to the COO, a huge number of incoming calls are being lost because weary members are hanging up and refusing to stay on the line waiting for someone to answer their calls. 

• Phone System (2008)        $600,000
• Call Center (2010)               $70,000
• Telephone Technicians       $100.00 per hour

 CENSORSHIP

Last month. former CFO, Manny Gaitmaitan, who remains a member in good-standing, visited the Valencia branch and requested a copy of the January Monthly Income Statement. 

The staff asked why he wanted a copy of the report. When he advised them that they were required by law to provide all members, in good standing, with a copy of the report, the staff reluctantly surrendered the report. 

After the former CFO left the branch, President Wiggington was called at his office and informed of Mr. Gaitmaitan's request. The President immediately called Mr. Gaitmaitan on his cellular and demanded to know why he wanted to view the Monthly Income Statement and told the former CFO that if he ever wishes to obtain a copy of the report at any time in the future, that he must first call Mr. Wiggington. Evidently, the highest officer at the credit union is also ignorant about what state law clearly stipulates. His request to Mr. Gaitmaitan is not only completely inappropriate, its illegal.  Paranoid much?

ANARCHY

We believe wholeheartedly, that any company's working environment and employee morale are a tone set by management. 

Over the past year, the credit union's Los Angeles branch has been the site of disturbances originating amongst non-exempt employees. As we've reported in previous posts, in 2009, an audit conducted by Turner, Warren, Hwang and Conrad discovered that more than $60,000 had been embezzled by a former receptionist of the Los Angeles branch. 

Approximately six months ago, too long-time employees entered into a loud verbal exchange near the lobby area and in the presence of members who were waiting to meet with tellers and FSR's. The loud exchange forced the AVP to leave her office and intervene. Both employees were suspended and counseled and each returned to work, a few days later. 

Three weeks ago, the another verbal altercation occurred. This time an argument ensued in the teller area in the presence of members and their co-workers. Both women were also suspended and upon their return to work, counseled. One woman filed a grievance against an FSR who intervened and tried to diffuse the argument. 

A few days after the complaint had been filed, AVP, Rodger Smock, and the credit union's attorney, William Adler, both visited the Los Angeles branch during which they interviewed employees. Three days later, consultant, Loren Lillestrand visited the branch during which he met with employees in an effort to dispel differences and animosities. Unfortunately, the problems at the Los Angeles branch are not going to be resolved by asking non-exempt staff to take an introspect view of their feelings and how they feel about their co-workers. 

The altercations point to a serious problem within the working environment in the Los Angeles branch. But loud verbal arguing amongst staff members was never an issue before Charles R. Wiggington, Sr. was appointment President. Coincidence? We hardly think so. 

LITTLE YELLOW SCHOOL BUS

On January 20th, a management meeting was conducted at the South Pasadena branch. During the meeting, obnoxious Credit Resolutions Director, Yvonne Boutte, verbalized comments about non-exempt staff members, affirming the arrogant attitude permeating the credit union's executive sector. 

During the meeting, Mrs. Boutte told attendees that in her opinion, "employees who don't carry their weight cooperate with changes should get off our bus and get their things and get on the little yellow bus." 

The statements were clearly offensive and inappropriate but the hateful Director echoed an attitude that embodies how President Wiggington views staff. 

For those who may not know, the "little yellow school bus" is a reference to buses used to transport mentally challenged children and adults. We don't care that her statement was politically incorrect or inane but what it says about the attitude she and other managers have towards the credit union's workforce. 

Mrs. Boutte evidently dislikes people who don't agree with the credit union's agendas, but under Charles R. Wiggington, Sr., his mode of administration consists of manipulating credit union policies and violating state and federal laws. She obviously is too morally and ethically confused to understand that not everyone is as pliable as she and some of the other managers have proven to be. 

"If you want to make someone angry tell him a lie; if you want to make him furious, tell him the truth. All truth passes through three stages. First, it is ridiculed, second it is violently opposed, and third it is accepted as self-evident."

Arthur Schopenhauer, Philosopher, 1788-1860

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