KENSINGTON, Md. — In a development that surprised many credit union observers, a majority of the members of the $332 million Lafayette Federal Credit Union who participated in the credit union's charter change vote appear to have cast ballots in favor of becoming a bank. A short statement from the credit union, which appeared on the CU's Web site late on Dec. 20, said that the members approved the charter change at the Dec. 16 special meeting. Unlike previous charter changes, the CU revealed neither the total numbers of votes cast nor the margin of victory.

A clear majority of members at the meeting had opposed the change, members said [see sidebar].

Lafayette said that RSM McGladrey, Inc., which served as the independent inspector of election, certified the vote results and that it expected NCUA to certify the results by Jan. 2.

Reaction from some quarters was fairly swift, but others who had taken a stand did not react publicly at all.

The National Cooperative Business Association, a Washington, D.C.-based association representing cooperatives nationwide, lamented the announcement. “This conversion robs the members of their equity, with little chance of recovery,” said Paul Hazen, president of NCBA. “It pointed out once again the many flaws in a process that clearly gives a strategic advantage to the insiders who propose the conversion and stand to gain the most.”

Hazen noted that the CU has been estimated to have spent more than $300,000 on the conversion process and that the CU conducted the procedure under regulations that denied members access to both sides of the issue.

He also said that he anticipated the group of members who opposed the conversion, whose work he praised, would press forward with their petition for a special meeting at which some or all of the CU's board of directors could be recalled. “It is entirely possible the board will be removed before the conversion is completed,” Hazen said.

NCBA is on record as opposing the conversions of credit unions to mutual banks generally and Lafayette's in particular.

But the Maryland and D.C. Credit Union Association, which had previously helped coordinate the efforts of members who opposed the conversion, said it would have no comment until after the NCUA did or did not certify the vote.

Members who have opposed the charter move were reluctant to speak for the record except to assert that their effort to gather signatures would continue and that they were surprised by the vote result.

The Washington Post, which has covered the controversy off and on since the beginning, also covered the CU's announcement that it had won the charter change balloting.

Members who opposed the move pointed out that the CU had, from their perspective, been holding the high cards from the very beginning as long as they had been effectively blocked from sharing any dissenting or alternative point of view of the matter with other members.

“Most of the members who get these mailings are going to vote with the board of directors because they think the board of directors has their best interests at heart,” said one, who asked that her name not be used. “They don't even think of the possibility that the leadership of the credit union might stand to really make money on something which really will not benefit them much at all.”

Another source familiar with the CU's effort and who had opposed the charter change, nonetheless noted that Lafayette had fought for the outcome and speculated, along with many others, that the reason the CU had not revealed the vote result was because it was very close. “I think they really went and beat the bushes for this vote,” the consultant said, explaining that the CU appeared to have targeted other, smaller SEGs, for supportive voters as it started to become clear that it was going to have a very hard time getting votes from its two biggest SEGs, the employees of the U.S. Agency for International Development and Small Business Administration.

Some of the credit union's other SEGs include blue collar and service workers who may not have been as aware of the CU leadership's potential conflict of interest.

The few members from the upper income community of Potomac who were willing to talk to a Credit Union Times reporter on Dec. 22, indicated they had voted against it and had already made plans to take their savings and loan accounts elsewhere. “I know about it and I am damn mad about it,” growled Earnest Halfull, a former USAID employee now working for a government consultant firm who carried several loans with Lafayette, outside of one of the CU's branches in Potomac. “I chose to belong to a credit union and if they had wanted to change this into a bank they should have talked with us first. This is just plain old corruption, insiders getting rich by ripping off what's not theirs–just like what we saw when they privatized things in Russia,” he said.

From here it's unclear what may happen next. Members opposed to the charter change have said they plan to contest the vote with NCUA and have pressed the CU to reveal the vote count. Like many others, the members speculate that a very tight vote could be overturned and cited incidents where, they say, members were not sent ballots.

If the margin of victory is 500 votes, the impact of these sorts of things are minimal observed Tom Carter, a member opposed to the conversion who is an employee of USAID, but if the margin of victory is only five votes it's a whole different story.

The CU has declined to respond to requests for comment on the vote tally. –dmorrison@cutimes.com

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Vote Tally Unknown Lafayette Members Agree to Charter Change, CU Says; Members Still Pressing Special Meeting Petition

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