LETTERS TO THE EDITOR (08/01/04)

LETTERS TO THE EDITOR

A final response re: 1st Security

Dear Editor:

The Ukrainian Weekly published a letter on July 11, written by Myron Luszczak, a former employee and board member of 1st Security Federal Savings Bank. The letter contains allegations consisting of inaccuracies, distortions, innuendo and blatant misrepresentation of facts. The letter-writer obviously intended to discredit my reputation in the Ukrainian community and I am therefore compelled to respond.

First, I want to set the record straight that no one made any investments when the bank was formed, as alleged by Mr. Luszczak. Individuals opened savings accounts on which the bank paid the prevailing rate of interest. The bank's records and archives document this. The bank prospered and grew in assets to $500 million at the time of its merger; however, its growth and our success cannot be attributed exclusively to the Ukrainian community. Ukrainians represented only 21 percent of the deposit base and a mere 5 percent of the loan borrowings. We attribute our success to serving predominantly Eastern European and Hispanic immigrants.

The primary reason for seeking a merger was not my retirement, as implied by the writer, or the lack of qualified successors, but the significant demographic changes that have occurred in our community coupled with an invasion of competing mega-banks into our market.

Mr. Luszczak inaccurately implies that Ukrainian media is not being supported by the bank when he writes that funds were cut off from Ukrainian programming. The fact is that the bank is now spending significantly more to support Ukrainian media than ever before, including advertising in seven Ukrainian newspapers, two television programs, two radio programs plus other forums. The only cut in programming was the radio program run by Mr. Luszczak's business partner, Lev Bodnar. Sponsorship there was severed after months of false public statements by the program's owner and highly inappropriate commentary that he would add after our commercials. The last straw that resulted in sponsorship cancellation was the program owner's inappropriate comments related to the Ukrainian American Youth Association (SUM).

Mr. Luszczak alleges that a majority of Ukrainians condemned the merger. I beg to differ since 98 percent of our stockholders - the majority of which were Ukrainians and Ukrainian institutions - approved the merger. The decision to merge was made after we conducted a thorough analysis of our future and survival potential in the highly competitive financial market.

The merger decision was unanimously approved by the nine member board of directors. I should point out that two members of the bank's board were proteges of Mr. Luszczak who also came from the Palatine community. The directors clearly understood that an important factor in their decision was their primary legal duty to our shareholders and our community.

It is a fact that many people and Ukrainian institutions were financially enriched from 1st Security, not just several individuals and board members as Mr. Luszczak stated. Many patriotic Ukrainians bought and held on to the stock of 1st Security because they believed it was both a financially prudent and a patriotic investment. These patriots are included in the 98 percent who voted for the merger because they understood that this option would serve the best long term interests of the Ukrainian community.

Perhaps Mr. Luszczak and his few allies, the 2 percent minority plus those not moved by patriotism to invest in 1st Security, are upset that their patriotism was so lacking that they did not have a greater ownership stake in 1st Security. Had the disgruntled handful invested more, they also would have received greater personal rewards. Well, not to worry because they will be able to benefit from the gains received from the merger by investors such as our Ukrainian churches, community groups, institutions, etc., in addition to the annual support to be provided by the Heritage Foundation for institutions that enrich our community.

1st Security employees were the largest block of benefactors from the merger. Unlike many mismanaged companies that cost employees their pension savings, 1st Security was able to reward its loyal employees through their ESOP pension fund for their many years of dedicated work, serving our Ukrainian customers in their native language.

Mr. Luszczak attempts to portray himself as a "super-patriotic" leader of the Ukrainian community and tries to take credit for everything we accomplished over the years. The truth is that the accomplishments listed by Mr. Luszczak were achieved by the hard work of many individuals, most of whom are not part of the small group of his allies griping about the bank's merger.

He writes that over 30,000 new immigrants recently arrived in Chicago which could have continued to grow the bank. If that is the case, may I ask why are our fraternal associations declining in membership? Why did the local Ukrainian credit union in Chicago decline in its deposits in 2003 by $7.7 million and why did it suffer a decline in assets by $12.3 million, the largest dollar decrease in its history? What happened to the Ukrainian National Aid Association which Mr. Luszczak so feverishly supported? Why are our metropolitans closing some churches and schools? He is obviously reluctant to face the truth and reality that the immigrants have their own individual priorities which may not include supporting institutions founded by prior generations, or other obligations he would like to assign them.

Lastly, Mr. Luszczak alleges that during the conversion process "the prospectus indicated that financial awards would be given to several retired directors who were instrumental in developing the bank." That allegation is a blatant misrepresentation of fact. The prospectus is a legal public document and available for verification. There was some discussion by the board of exploring such awards, but when Mr. Luszczak and his allies attempted to derail the conversion and urged their friends and acquaintances not to purchase stock (while at the same time he was making 1st Security stock purchases for his own benefit), the board was not about to reward him for behavior that was detrimental to the bank's interests.

This is the last official response you will hear from 1st Security or from me on the bank's merger. Mr. Luszczak, his business partner, and a few of their friends and relatives have spent the last several months trying to create animosity and division in the community with their disruptive behavior, which plays into the hands of the enemies of patriotic, united Ukrainians. The facts belie his pronouncements. Enough time has been wasted on divisive, non-productive activities when more important issues demand the attention of our community.

Julian E. Kulas
Chicago

The letter-writer was president and CEO of 1st Security Federal Savings Bank, serving in that capacity since its founding 40 years ago. Currently he is a member of the board of directors of MB Financial Bank.

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