LETTERS TO THE EDITOR (04/11/04)

LETTERS TO THE EDITOR

Moral integrity should take priority

Dear Editor:

And so it is that on its 40th anniversary, instead of celebratory congratulations, 1st Security Federal Savings Bank in Chicago succumbed to the corporate greed that is so pervasive in today's society.

Ironically, a bank that established its foundation with the hard-earned financial resources of the World War II generation, and subsequently grew to a remarkable, nearly half-billion-dollar balance sheet, will no longer be an integral part of the Chicago Ukrainian community. It is most unfortunate that it will not be able to provide service as a Ukrainian bank for the latest group of Ukrainian immigrants, the Fourth Wave. In its place will be an American institution, MB Bank.

1st Security's actual initial move away from being a true Ukrainian community bank came several years earlier when the bank's president, Julian Kulas, along with a like-minded board approved a plan to convert the bank into a stock-based, publicly traded institution. Interestingly, since that time, this same board of directors has reaped very generous personal financial rewards from their various stock options. As noted in SEC filings, Mr. Kulas alone has a trust account worth upwards of $10 million of 1st Security shares.

In his Ukrainian Weekly article dated February 8, Paul Bandriwsky, the CEO of 1st Security, mentioned a "merger" of sorts with the MB Bank, and expansion of banking services which would thus be facilitated. He also implied concern that people would possibly bank elsewhere if services were not expanded.

Let me state this: If someone wants to support and strongly believes in something, then they will be loyal to that principle or belief. I personally banked with 1st Security for numerous years, many of which were prior to the Internet age. Being an Army officer, I banked almost exclusively from out-of-state, including a year stationed in the DMZ in the Republic of Korea. Although it would have been much more convenient to bank with a military credit union, I chose to bank with 1st Security because I supported the ideals on which it was founded. The fact that 1st Security was a Ukrainian bank also was important to me.

I have this to say to Mr. Bandriwsky and to the soon-to-be former board of directors: I have no such feelings for MB Bank. Moreover, the Ukrainian community had a Ukrainian bank, and now it is gone thanks to all of you. There was no pressing need to take the bank public several years ago as you did, aside from your desire, as well as the bank president's apparent desire, for getting rich quickly and without much effort.

If expanded services were needed, then the bank board and its president should have concentrated their efforts on developing a strategic plan to do so and not waste time exploring various sale options and providing themselves with various stock options. Other institutions such as Selfreliance have managed to successfully expand various services, and 1st Security clearly had the financial resources to do so. What 1st Security did not have was a president and a board of moral integrity; unfortunately, they willfully put their own personal interests ahead of those of the community that had entrusted them to do the right thing.

Mr. Bandriwsky also mentions the Heritage Foundation and the support that it will provide for the hromada. We have to ask ourselves: Would not the Ukrainian community in Chicago have been better off had the bank remained a true community bank without this foundation? Secondly, how can we accept monetary support from a foundation administered by the same people who shrewdly manipulated the business direction of 1st Security to further their own personal wealth and ultimately led to the bank's demise? How can we trust and respect these people?

These same people are now hypocritically trying to justify themselves and delude the hromada into believing that their actions were somehow good for the overall well-being of the Ukrainian community. Just like the executives of Tyco, WorldCom and Enron, the 1st Security board and president placed their own self-interests above their moral duty and obligations to the entire Ukrainian community - the same community without whose support the bank would have never had survived in its infancy.

Let us not be fooled by the former directors and president of 1st Security Federal Savings Bank. Let them keep their ill-gotten monies and their Heritage Foundation. Worthy Ukrainian organizations will be able to secure donations from other generous donor sources. The Ukrainian community needs to work on rebuilding trust in its leaders. Let this bank fiasco also be a civics lesson to our children, as yet another example of what is right and what is wrong. To move forward as a society, we need to instill in our children the importance of duty, honor and moral integrity.

Myron O. Bodnar, M.D.
Mequon, Wis.

More on the merger involving 1st Security

Dear Editor:

On Saturday, March 13, the 1st Security Federal Savings Bank held a meeting to explain the merger with MB Financial announced January 12. The meeting should have been held in January, but it did allow the community to address issues in a public forum.

In essence the meeting encompassed the world view that "these are the best of times, and yet they are the worst of times." President Julian Kulas explained that in 2003, the bank did very well, however, the times will get very difficult in the future. Thus the board decided to merge. It is a matter of definition if this was a merger or a sale, for consistency we will continue with the term "merger." In previous annual reports, there were no dire warnings to the community, everything seemed to be on track. Suddenly, in a very short period of time, a merger was needed.

Mr. Kulas explained that the demographics have changed in the community and that there is an "invasion" of banks into the community. For the bank to sustain itself in the present form would have been very difficult. During the discussions, Luka Kostelyna asked how the other banks plan to compete. Lew Bodnar asked why the community was not forewarned that this was taking place. The issue of retirements came up, as several key members of the staff plan to retire, including Mr. Kulas. Did a lack of a succession plan drive the deal?

According to Paul Bandriwsky, the chief operating officer, 1st Security has assets close to $500 million with a $75 million reserve. This makes the bank the seventh largest thrift in Chicago. On the other hand, Mr. Bandriwsky noted in previous article that "Ukrainians ... have a reluctance to let go of something that they have if it is not sustainable."

The question that was not answered at the meeting is: What is sustainable? Is the sky really falling? Would the competition actually destroy the bank? If the merger was actually done for altruistic reasons, what role did a financial windfall play for the decision-makers? In other words, would the same decision be made if incentives, stock options, etc. were not a factor?

The key point that was not addressed was: Who actually gained from this financial transaction? Yes, we know that the stock was $35.25 and if one participated in the initial public offering at $10 a share then you made $25.25. Yes, this is good for shareholders, but this is the end of a bank as we know it. Did the directors gain from this transaction? How much was the capital gain? How many shares did each director get for being on the board? This was not discussed, nor were questions answered. Eventually the facts will surface.

After Mr. Kulas finished speaking, the president of the board, Paul Nadzikewycz stated that there was no undue influence. The directors all supported the decision to "merge." However, when the directors were asked by the president to defend their decision, not one director got up to the microphone. It was an interesting picture that spoke volumes.

The disposition of this venerable institution that had served the Ukrainian American community so well in Chicago was a shock to many. Integrity is to do what's right, legally and morally. No one can fault the legal aspects. Maybe the community should have inserted a "no sell" clause, but that is hindsight. Each of the directors will have to do an introspective analysis about the moral component of this deal

Roman G. Golash
Palatine, Ill.

The Ukrainian Weekly welcomes letters to the editor and commentaries on a variety of topics of concern to the Ukrainian American and Ukrainian Canadian communities. Opinions expressed by columnists, commentators and letter-writers are their own and do not necessarily reflect the opinions of either The Weekly editorial staff or its publisher, the Ukrainian National Association.

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