pam_ldap conversation error

I'm trying to setup postgresql to authenticate using pam_ldap against a
windows 2003 Active Directory server. I have setup accounts on the
Active directory and tested the authentication against it using services
like local machine login and ssh logins and it authenticates properly.
I edited the pg_hba.conf and added an entry for one of the users, like this:

local all derrick3 pam postgres

I have a file in /etc/pam.d/ called postgres and it looks like this:

auth required /lib/security/pam_ldap.so
account required /lib/security/pam_ldap.so

I have logged into the template1 database and added the user derrick3.
I then tried to run this:

psql -U derrick3 -d template1

it prompts for a password and gives this error after I use the password
I setup in Active Directory:

psql: FATAL: PAM authentication failed for user "derrick3"

if I look in postgresql.log I find this:

LOG: pam_authenticate failed: Conversation error
FATAL: PAM authentication failed for user "derrick3"
LOG: could not send data to client: Broken pipe
LOG: pam_authenticate failed: User not known to the underlying
authentication module
FATAL: PAM authentication failed for user "derrick3"

Can anyone help put me on the right track? Thanks.