Responses to the Formal Requests Filed During the Annual Meeting on May 18, 2012

Responses to the Formal Requests filed during the Annual Meeting on May 18, 2012

This is to address three formal requests by PSFCU members filed during the latest Annual Meeting requesting removal of the director from his seat on the board, another director from the PSFCU membership and the Supervisory Committee member from his seat on the Supervisory Committee for the reasons outlined in the request.

The removal of officials from their seats is not within the powers of the Board of Directors. All matters related to the appointment and removal of the credit union official is regulated by the bylaws. In order to remove the director, a special meeting of members must be called and the director must be given an opportunity to be heard. Then the assembly of members decides whether the official is removed or not.

The removal of a director or member of a credit union membership may also take place only through the special meeting. Removal of membership does not fall within the remit of the Board of Directors.

The special meeting is a serious measure and must be thoroughly considered before any action is taken. Such decision may have serious ramifications such as:

1. Significant costs (of meeting itself) – the notifications to over 70,000 members and costs of election company overseeing the voting process are about $60,000-70,000.

1. Undetermined legal ramifications – the possibility of the legal challenge by adirector/official in question and the scrutiny from the NCUA must be taken into consideration. The legal challenges can add significantly to the costs of the meeting itself.

1. Reputation Loss - every special meeting affects the reputation of the institution with the NCUA, with the media, our members and potential members. We hear very often from our members, or non-members that they are not interested in PSFCU services because of constant in-fighting and instability. We must avoid the appearance of in-fighting and tone down our reputation for the same. We must work toward improving the image of PSFCU and the Polish ethnic group. The special meeting called on March 25, 2012 was court mandated after a protracted 3-year legal action, which cost the credit union a huge amount of money. Members demanded and ultimately decided on expulsion of a group of people, but it came at a great cost to both our reputation, and the finances.

The Board of Directors is elected to lead the credit union in a sound and safe manner; we listen to our members and try to accommodate their requests; but BOD is also a model of representative democracy starting with how the names appear on the ballot - either by nominations or the petition process - through to the elections by popular vote. As in any democracy there is always divergence of views on the choice of candidates but ultimately it is majority of member votes that decide who is to be entrusted with the role of a director and will be setting the strategic course for PSFCU for the next term.

Although a special meeting is a prerogative of the members based on the provisions of the bylaws Article IV. Section 3,

(it mustbe called by the Chair upon submission by members of a petition containing at least 750 valid signatures of the credit union members), in circumstances other than thepetition, it should be called only as an option of last resort because it is incredibly expensive and may seriously undermine the safety and soundness of the credit union.

In the next step we would like to address separately few other matters requested by members:

1. Requests by Jozef Luczajand Anna Czerniszewska addressed to Marzena Wierzbowska, Chairman of the BODto remove Leon Kokoszka from his seat on the Board of Directors for the reason that he has presented his program during elections 2011, which he fails to implement:

This is an interpretation of specific reasons listed in the request:

1. Removal of our credit union from the financial crisis, in which effectively $1,200,000,000.00 of our savings is insufficient to cover our costs of service and extremely low dividends. (Our credit union has registered a loss of 1,400.000 for second year in a row).
2. Resolving all the conflicts between our credit union, the sponsoring organizations and the civic committees through negotiations and ending legal actions, which cost $300,000.00 in last six months.
3. Extending a guarantee to the credit union owners ( active members of this credit union) to receive decent dividends, obtain access to all types of credit, and a possibility to utilize programs and services of sponsoring organizations, which should be professionally managed and financially supported by the credit union.

Response: Mr. Kokoszka is only one of eleven directors serving on the BOD. One vote makes no difference, it takes a majority action to make decisions. Therefore Mr. Kokoszka as a one of directors cannot be held responsible for not fulfilling his election program.

In response to #2 - PSFCU does not initiate the lawsuits; if PSFCU is a party to a legal action it is always as a defendant. We’d like to add that the only suit that PSFCU was involved in – with Civic Committee of the Members of PSFCU was dropped in December 2011.

2. Request by Jan Welenc to Marzena Wierzbowska, the Chairperson of the Polish & Slavic FCUto remove Elżbieta Baumgartner from the PSFCU membership for the following reasons:

This is an interpretation of specific reasons listed in the request:

1. By sitting on the Board of Directors for many years she derives financial benefits by publishing books and periodicals in a form of guidebooks. The guidebooks are developed based on Ms Baumgartner participating in every possible training and travel offered by the credit union, which is paid by members. I consider this behavior immoral and unethical, as she has been doing this for many years for her own financial benefit and she must be removed from her seat on the board.

1. The unethical behavior of Ms. Baumgartner because of her ostentatious step down from the Board of Directors and at the same time announcing in the Nowy Dziennik article that she will be back on the board because she will be elected by members. Ms. Baumgartner’s acts expose our Credit Union to a risk of loosing members’ trust, her acts are meritless and they require a decisive treatment by the Board of Directors.

Response to A. B. - All directors of the credit union are required to participate in courses and webinars to expand their knowledge of the Credit union industry, regulatory compliance, and finance. Those courses are not always available locally, and may require travel. Ms. Baumgartner’s travel is not an indication of unethical behavior but her fulfillment of her obligations as a director of PSFCU. Moreover, it is precisely because she is renowned and respected by large part of the Polish community as anauthor and columnist (career that predates her tenure of the Board of the PSFCU) that she continues to be re-elected to the Board by popular vote.

3. Request by Zofia Balczewskato 1).Remove Edward Pierwola from the Supervisory Committee and the position of a SC Chairman for the following reasons:

This is an interpretation of specific reasons listed in the request:

1. Unfounded hold of the Special Meeting of Members, called in accordance with the bylaws on March 11, 2012.

1. PSFCU Bylaws does not allow the Supervisory Committee to participate in legal actions, and such an action file No. 5212/12was brought against BOD Chairman at the expense of members, against the will of the PSFCU members and ignoring two court decisions from NY State Supreme Court and the Appelate Division directing to call a special meeting.

Response to A. and B. - Main responsibility of theSupervisory Committee is to safeguard the safety and soundness of PSFCU. It is not our intention to provide explanationsto defend Mr. Perwola for his actions as a Chairman of Supervisory Committee, but rather to make an effort to explain how the Supervisory Committee makes their decisions. The decision to challenge the Special Meeting or to bring legal action was not solely that of Mr. Pierwola. He is only one of five members serving on the Supervisory Committee, and it takes a majority action to make decisions on the committee. Majority of the committee must have felt that special meeting was a threat to the safety and soundnessof PSFCU, and therefore, it reached the decisions to initiate a legal action.

1. Against the rules, he declined to investigate case of Janusz Sporek, who publicly accuses other directors, and being a director himself makes public the financial matters of PSFCU members, which may result in legal action.

Response: This complaint was in fact filed with the Supervisory Committee and was investigated by the Audit Department. The investigation concluded that howeverunfortunate this disclosure was, it was not illegal. If there is an outstanding judgment, anyone can obtain the information about the loan. Once the loan becomes subject to a judgment it becomes public information.

1. As a Supervisory Committee Chairman he shows no ethics and consideration to the PSFCU bylaws; he is also unfamiliar with the bylaws, which was demonstrated during an informational meeting on April 27, 2012.

1. Acts in Illegal, immoral and unethical way by defending his collaborators, which may affect Credit Union’s reputation and financial losses.

Response to D. and E. -D. and E. are not specific enough to provide responses.

2). Request that Mr. Pierwola reimburses the costs incurred by the PSFCU due to placing a hold on a special meeting and actions in defense of the discredited persons.

Response: As per PSFCU Bylaws article XVI §8 PSFCU officials are indemnified for costs incurred in connection with judical or administrative proceedings in which they become parties by reason of performing their official duties. PSFCU maintains insurance on behalf of its officials against any liability asserted against them and expenses incurred by them in their official capacities and arising out of the performance of their official duties.