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Show The National Enterprise, June 8, 1977 Page thirteen Donovan refutes charges made by GAO on stock conversion Prudential Federal Savings, one of 22 savings institutions converting from mutual to stock ownership since 1975, is apparently innocent of broad accusations made by a recently published government report. The report, compiled by the General Accounting Office and submitted to the U.S. Senate Banking Committee, accuses several of the nearly two dozen converting institutions of allowing insiders a chance to reap windfall profits, according to committee chairman Sen. William Prox-mire. Proxmire, in a statement released last week, said insiders have taken advantage of their prior knowledge to increase their deposits, making them eligible to purchase large amounts of stock, and gain control of the company. In a conversion from mutual to stock ownership (first allowed by Congress in June, 1975, as an experiment), depositors in the mutual association are given the right to buy stock in proportion to the amount of money held in deposits. In its action allowing the experiment, Congress gave 51 mutual Savings and Loan institutions in the country a chance Until that time to convert. Congress had placed a mora-torim on the changeover fear- ing insiders would take advantage of obvious benefits. Guarded against abuse Prudential Federal Savings and Loan, which completed its transformation in April, 1976, guarded against potential for abuse, according to Gene Donovan, president. He explains Prudential management recognized the opportunities the changeover presented for insiders to gain Rate leaps upward after lull r Weekly Unemployment Rate March Apr May Source: Job Service The weekly unemployment rate shot up during the week ending May 28, after two weeks of stability and two previous weeks of downward movement. Reaching 5.7, the indicator is the highest its been since the end of March. control, and guarded against them. Unlike most other as- sociations. Donovan adds. Prudential did not sell shares, but distributed them free to eligible depositors. Shares were distributed to those eligible on April 15. 1976, Donovan states, but the date chosen to determine depositors of record preceded the date at which conversion was first considered, eliminating any opportunity for insiders to cash in. have 23 shares of stock in Prudential, Donovan points Hows that for control out. of the company? I In a report responding to the GAO analysis, the Federal Home Loan Bank, which reg ulates Savings and Loan institutions. calls the report fair and objective. The bank adds it has recognized many of the problems brought out in the analysis, and has begun dealing with them. According to Phyllis Miller, bank spokeswomen, 73 institutions across the country have applied for permission to convert. The bank has approved 27 applications, and 22 have actually completed the II I II I sis I I I I sfo DISTRIBUTION SYSTEM CO., INC. Specialists in Electronics EXPERTS IN DOMESTIC & INTERNATIONAL AIR CARGO SERVICE I II (801)487-542- 5 466-525- 3 We provide moving instruction sheets for all your employees, to convey complete information about the move and their part in it. transfer. She says the advantage of conversion is the gain in assets and stability an institution usually experiences. She adds Prudential's conversion "seems to have been accomplished more fairly than most. UGAR0USE fkN!lNES S'MCJ 1907 AGENT 4 BO EAST 2200 SOUTH 4S7.36S6 BEKINS VAN LINK CO. |