KENSINGTON, Md. — As has been the case in recent attempts to convert credit unions to mutual banks, the effort to convince the members of the $332 million Lafayette Federal Credit Union to change charters seems headed for a recall fight. Members questioning the proposal from Lafayette to convert first to a mutual and then adopt a stock-issuing structure are circulating a petition calling for a special meeting at which some or all of the board members could be recalled. The credit union is still in the early part of the balloting process. The petition asserts a lack of response to members’ questions and a request to view records and minutes related to the conversion as the reason for the petition. “Answers to the questions presented and a response to the demand to inspect the records have not been forthcoming, in spite of repeated requests to the directors and chief executive officer for such answers,” the petition states.
Significantly, in addition to whatever face-to-face signature collecting may be conducted, the petition is also being offered online at the savemycreditunion.coop Web site.
The Web offering helps those members in remote areas. A significant number of Lafayette’s members work for the Peace Corps and the U.S. Agency for International Development and are posted overseas, according to Audrey Sturdivant, one of the members working to organize the effort.
“We wanted to give everyone a chance to get involved,” Sturdivant said. The group aims to collect at least 750 signatures.
Sturdivant said members that worked for the Small Business Administration had difficulty accessing and signing the petition from their office computers. Attempts to sign the petition triggered an SBA computer security block, Sturdivant said.
A March 28, 2006 NCUA legal opinion letter approved collecting electronic signatures on a special meeting petition.
As of press time, the online petition had only 25 signatures. Sturdivant said that she and the other organizers had not yet been able to count signatures, but that members she spoke with were by and large eager to sign.
Members who declined to give their names, but said they signed the petition reported doing so because of a sense of unease about the proposed conversion and a desire for all the facts of the situation to come out.
The petition drive does seem to have prompted Lafayette’s leadership to be a bit more responsive to the media. While CEO Michael Hearne has steadfastly declined to return calls to Credit Union Times, he has spoken to CUNA’s News Now and to the Baltimore Examiner.
In his comments to the Examiner, Hearne told the paper that the CU’s “officers” have “foresworn” taking stock options should the credit union’s members approve the CU’s conversion to a mutual bank.
Lafayette has already told members that it will offer stock under a mutual holding company structure should they approve the charter change, but it left the question of an employee stock option plan open.
“Although no final decision has been made, Lafayette may, however, use an employee stock ownership plan (ESOP) for all its employees as an additional retirement benefit in the future,” the CU told members in its ballot disclosure package.
Hearne has not yet returned calls to clarify his comments to the paper as to which officers have said they would not take stock options and whether an ESOP would be covered in the pledge.
In his comments to the trade association, Hearne cited attempts he said he made to be open about the process and to answer members’ questions.
“I’ve had three town-hall meetings and visited many select employee groups. And at our regular annual meeting, we mentioned we were considering the conversion,” Hearne said
“It’s a very disruptive process,” he added, asking, “How much longer do we have to stand for this?” He said he was “disappointed that there is a lot of misinformation and attacks on board members’ integrity by people not very well-informed and some who may not be well-intentioned.”
But the members circulating the petition pointed out that Hearne and the CU have not acted in a truly transparent way.
They note, by way of example, that the CU only agreed to allow members to see some of the documents related to the conversion and then in only a limited way after having signed a nondisclosure agreement.
“While we do not object in principle to executing a confidentiality agreement, we would need to review the agreement beforehand (and possibly retain legal counsel to advise us),” the members wrote in an Oct. 23 letter to the board, “to ascertain that it would not preclude us from releasing information to other members, etc. that reflects misfeasance, malfeasance, or nonfeasance on the part of the board in performing its responsibilities to the members in approving and recommending the conversion.”
They also questioned the good faith of Hearne and the CU in the CU’s refusal to help them contact other members of the credit union.
The refusal, they said, was to be expected, even though pending NCUA regulation would mandate such communication be made possible. But they questioned the credit union’s assertion in a letter that the group had asked for a mailing list, pointing out that they did not seek access to the list, but instead were willing to let the CU do the mailing for them.
“Mr. Hearne’s statement that ‘[we will not] assist you in contacting our members’ belies his stated representations to approximately 100 members at the September 8, 2006, ‘town hall’ meeting at the U.S. Agency for International Development wherein he pledged that the Credit Union would inform all members about the establishment of a website where they could post e-mails presenting their thoughts, opinions, questions, and concerns relating to the proposed conversion,” the members wrote on Oct. 28.
So as of now it is unclear what the next step may be. Members circulating the petition say they will continue to do so and estimate they will soon have the 750 required signatures. Should that happen the credit union will have to decide if it will honor the members’ request for a special meeting or, like the $1.8 billion DFCU Financial, decline to call one. NCUA did not take action against DFCU Financial for denying the special meeting. –email@example.com