Floundering in Quicksand

REFUSAL

Since April, Priority One Credit Union's President, Charles R. Wiggington, Sr. has defied state law, refusing to post the credit union's Monthly Financial Income Statements.

We of course find his refusal more than a little peculiar when one considers his chronic declarations that business has improved. So why not post the evidence that would support your statement? He's also recently complained that he's tired of our frequent reports concerning his refusals to post the income statements. All we can say is, if your tired of reading about your refusals, then post the statements. 

Here again is the California code which describes the credit union's obligation to post the statements:

California Code of Regulations, Title 10, Chapter 1, Section 30.701(c): 

The Credit Union shall post copies of its statement of financial condition and statement of income in a conspicuous place in each office of the credit union or at a place convenient to the members as designated by the board of directors, where they shall remain posted until replaced by the financial statements of the next succeeding month. In lieu of posting copies of such financial statements, a credit union may post a notice in a conspicuous place in each office of the credit union stating that copies of the financial statements are available upon request, and the credit union shall make copies of the financial statements available to members upon request."

Having grown weary of President Wiggington's frequent defiance of state law, a member of the credit union recently filed a complaint with the DFI. The DFI contacted the President by phone and were told by President Wiggington, himself, that the financials have always been posted at all branches. The President lied. Not only did he lie to the DFI, but he immediately afterwards, called the Los Angeles, Van Nuys, Burbank, and Redlands branches and informed them that they would each be provided current statements, later that same day. 

The DFI whose investigation was minimal, at best, sent the following email to the member who filed the complaint:

The CEO of the Credit Union was contacted, and he stated that the statements are posted at each branch office. He did mention that there was a problem at their Valencia office recently where the current statements had not been posted and what was posted was stale dated. He indicated that this was corrected and the manager of that location was informed that the financials were to be posted as soon as they were received. He also stated that you may request copies of past financial statements, if you like. 

If you would like to file a complaint against the Credit Union, please let us know. 

Thank you, 

Consumer Services Office 

California Department of Financial Institutions

President Wiggington may not be an expert liar, but he is a liar. The member accepted the DFI's invitation and filed a second complaint. During the week of July 6th, the President received a letter from the DFI, accompanied by a form requiring his completion and signature. On Monday, July 13, 2009, the financials for the month of June were finally posted at all branches. The President was forced to concede to state law. It's obvious that President Wiggington would never have tried to hide the financials if business were actually as good as he says it is and his refusal to post the statements attests to his character and dishonest proclivities. 

MEANINGLESS ASSURANCES

As reported previously, during this year's annual meeting, the apparently nervous and heavily perspiring President assured attendees that the credit union remains financially sound though exerting every effort to hide the credit union's Monthly Income Statements. 

During the same meeting, Board Chair, Diedra Harris-Brooks said little about the credit union's actual documented financial performance and she announced that the Treasurer's Report would be read, however, the report was never read. 

Supervisory Committee Chair, Cornelia Simmons, declared as she does year after year, that the credit union is financially sound. If Priority One's performance were sound, why hide the monthly financials in defiance to state law and why would Mrs. Harris-Brooks have announced during the annual meeting that the Treasurer's Report would be read and then fail to read it? 

Prior to the start of the meeting, copies of the 2008 Annual Report were distributed though the contents of the report were never read or discussed during the 30-minute meeting which followed. However, we've reviewed the report and it shows that the year-to-date amount of Net Income is $4 million in the RED.  So how did Cornelia Simmons determine that $4 million in the negative is an indicator that Priority One's financials are sound? 

Last March, a reader sent us the following message:

If the NCUA takes over POCU..... and if you ask me to bet, I would say the clock is ticking... your blog is well known in the industry so I gotta believe that the DFI and NCUA are watching.I was looking around the POCU web site for the Annual Meeting date because one of your readers inquired, but before I could find the date, I found something that should catch some attention and make for an entertaining post if you’re interested. 

On the front page of their site they are advertising a $100k CD at 3.3% APY and a new auto loan rate of 3.49% APY. It doesn't take a rocket scientist to know that when you only have a spread of 19 basis points you’re going to lose money. Even if they had 0% charge-offs, which of course they won’t, they would lose money because their overhead per loan costs more than 19 bp. And that’s not including marketing costs or the fact that since they are already hemorrhaging money. How exactly can the afford to do this?

A few weeks later, the same reader sent us another message:

I do not see how they can save this ship. I seriously have to believe that 

1) They will be merged by 12/31; or, 
2) they will be liquidated by 12/31/09. 

Sad, really sad

We also received the following comment from another reader in response to our last post:

What happened to the election? The balance on the 20 million that was borrowed has not gone down. Or are they are making interest payments only!!!!!!!!!! $600,000.00 in interest payments

We've not calculated the actual amount that has been spent in interest alone against the $20 million loan borrowed in mid-2008 by President Wiggington. The credit union's finanical statements reference that payments made by the credit union approximate between $30,000 and $33,000 per month. What's more, the payments are only submitted to pay interest on the loan amount. Depending on when the loan may eventually be paid off in its entirety, the amount paid in interest may in fact exceed $600,000. Is this an example of the President's effort to work "smarter"?  

The June 2009 
Monthly Income Statement

The President has finally posted the credit union's Monthly Income Statement, albeit it against his will. Here are the figures:

ASSETS
Loans $114,441,315.16

Less: Allowance for Loan Losses

$2,600,000.00

Net Loans:

$111,841,315.16

Accounts Receivable

$1,036,230.02

Cash

$2,997,023.33

Investments

$62,057,332.22

Investment in COOP

$40,000.00

Investment in FSCC

$24,000.00

NCUA Deposit

$1,284.522.90

Accrued Income

$843,700.12

Prepaid Expenses

$476,376.77

Other Assets

$0.00

Sub-total

$180,709,370.61

Fixed Assets

$9,175,751.99

Less Accumulated Depreciation

$5,838,158.02

Net Fixed Assets

$3,337,593.97

Total Assets

$184,046,964.58

LIABILITIES AND EQUITY

LIABILITIES

Accounts Payable

$120,038.94

Notes Payable

$20,000,000.00

Accrued Expenses

$364,530.64

Dividends Payable

$0.00

Suspense Accounts

$0.00

Other Liabilities

$13,888.06

Shares

$150,756,281.89

Total Liabilities

$171,254,739.53

EQUITY

Regular Reserve

$5,128,606.33

Undivided Income

$7,663,618.72

Total Equity

$12,792,225.05

Total Liabilties and Equity

$184,046.964.58

Operating Income

$535,454.75

Income from Investments

$136,895.09

Fees and Charges

$231,672.78

Miscellaneous Operating Income

$16,478,12

TOTAL OPERATING INCOME

$920,500.74

OPERATING EXPENSES

Employee Salaries/Bonus

$323,737.86

Temporary Personal

$0.00

Personal Time Off

$16,916.34

Employee Pension Plan

$6,167.06

Workers Compensation Insurance

$4024.25

Employee Medical Insurance

$28,328.25

Medicare Expense-Employer

$4169.67

Social Security Taxes-Employer

$17,828.94

FUTA Expense- Employer

$143.66

SUI Expense- Employer

$736.24

Life/Disability Insurance- Employer

$1867.14

Credit Union League Dues

$2268.67

Membership, Dues, & Subscription

$2428.67

Branch Lease

$15,460.98

Property Taxes

$2542.01

Janitor Expense

$4035.75

Utility Expense

$5151.85

Building Maintenance

$1045.00

Depreciation-Building

$14,277.24

Security Expenses

$5924.69

Telephone Expenses

$24,608.94

Postage

$9807.51

Share Draft Expenses

$2463.83

Equpment Maintenance

$28,280.91

Stationeries and Supplies

$10,282.62

Surety Bond Premium & Other Insurance

$9857.67

Depreciation- Furniture and Equipment

$32,611.76

ATM Expense

$19,564.80

Check Card Expense

$20,788.15

Technology and Computer Expense

$18,960.35

Miscellaneous Bank Charges

$1951.87

Education Expense-Staff

$79.00

Education Expense-Senior Management

$0.00

Education Expense-Supervisory Committee

$0.00

Education Expense-Board of Directors

$0.00

Training Expense

$0.00

Advertising Expenses

$1200.00

Loan Promotions

$5,298.62

Promotional Items

$0.00

Member Research

$0.00

Ambassadors

$743.96

Business Development Expense

$488.50

Collection Expense

$1251.54

Real Estate Expense

$0.00

Indirect Dealer Fee

$0.00

VISA Expense

$0.00

Credit Investigation Expenses

$5248.44

Lending Center

$3858.81

Lending Expense

$$0.00

Legal Expenses

$19,241/93

Audit Expenses

$3500.00

Consultancy Fees

$5156.62

Associated Management Company

$0.00

Shared Branching Expense

$5371.00

CUSO Expense

$0.00

Provision for Loan Losses

$66,792.01

Borrower's Insurance

$0.00

NCUSIF Stablization Expense

-$160,551.94

DFI Admin. Fee

$2842.00

Cash Short (and Over)

$535.09

Interest on Borrowed Money

$58,561.65

Annual Meeting Expense

$39,908.43

Board of Directors/Supervisors

$801.35

Annual Retreat

$0.00

ADP Charges

$3140.70

Credti Union Car Expenses

$116.87

Commissary

$608.34

Mileage and Reimbursements

$3310.85

General Expenses

$9078.62

Courier Services

$9954.11

Storage Expenses

$2827.82

Branch Expenses

$0.00

Other Losses

$3727.05

Merger Expense

$0.00

Succession/Strategic Planning

$0.00

Ballot Incident Expense

$0.00

Total Operating Expenses

$733,323.44

Income (loss) from Operations

$188,177.30

Dividends Paid

$148,956.35

Loss (Gain) on Disp of Assets

$0.00

Loss (Gain) on Disp of investment

-$886,456.66

Franchise Tax Board

$0.00

Total Dividends & Other Income

-$737,500.31

Net Income (Loss)

$925,677.61

Net Income (Loss), Year-to-Date

-$3,915,781.79

NET INCOME obtained from the credit union's Quarterly Financial Reports filed with the NCUA 

Quarter Ending June 2008

$63,517

Quarter Ending September 2008

$73,364

Quarter Ending December 2008

-$690,652

Quarter Ending March 2009

-$3,470,435

Quarter Ending June 2009

-$3,915,782

No wonder the President felt emotionally driven to hide the credit union's financials. Priority One remains in the negative, but didn';t President Wiggington; Board Chair,  Diedra Harris-Brooks; and Supervisory Chair, Cornelia Simmons, describe the credit union as financially sound? Is there anytime when a negative Net Income balance indicates financial soundness? 

TWISTED

President Wiggington has a convoluted perception of what constitutes "thinking smarter." He implements a company wage freeze and reduces budget and then hires a COO. His alleged efforts to stabilize losses are chronically undermined by excessive spending. Not only have his decisions, like choosing to spend money on a $600,000 phone system and unnecessary updated email system, diminished the credit union's financial standing but his personal undisciplined behaviors, like his sexual harassing of a former female employee, have forced the credit union to spend monies on attorneys, investigators and consultants. What's more, during his approximate 6-week suspension, during which an investigation was conducted, the Board Chair, Diedra Harris-Brooks, deemed it prudent to place him on suspension with pay though all non-exempt personnel when suspended, are done so without pay. 

What's more, a few weeks following his reinstatement, the President was paid over $7000 for unused sicktime. Shouldn't he  have been ordered to pay for all attorney and investigation costs, particularly when the evidence proved he had indeed sexually harassed the former employee?

President Wiggington, the Board Chair and some of his other executives are depleted the credit union's financial resources, making certain that they remain employed and that they are allotted wage increases and bonuses. 

CONSCIENCE IS GOD'S PRESENCE IN MAN

Emanuel Swedenborg, Arcana Coelestia, sec. 4299