KENSINGTON, Md. - Members of Lafayette FCU voted to approve the conversion of the $330-million credit union to mutual savings bank, the credit union announced last week, setting up what promises to be another prolonged fight with members who oppose the charter switch.
"Even if it goes through they're not going to see any of that money," said Scott Steins, a Lafayette member, referring to an allegation that board members and management will profit from a charter switch. Steins noted that the group opposing the conversion plan is engaged in a petition drive to recall the board, and that they will continue to press their case for a special meeting where members will be asked to vote on a recall of the board. He said the group is about 80% of the way to collecting the 750 member signatures they need to activate a Lafayette bylaw that requires the board to call a special meeting. As they have throughout the process, credit union officials refused to comment publicly. The 90-day vote count was culminated in a secretive special meeting in remote Arlington, Va., a 45-minute drive from the credit union offices, where a handful of members expressed their opposition to the process, and which the members alleged was carefully manipulated by the Lafayette management.
"It seems like they want to pull the wool over everybody's eyes," said Janine Finnelli, a member who spoke to The Credit Union Journal reporter outside the meeting, after credit union officials had him removed by an armed security guard. Upon his removal, he was prevented by uniformed police officers from reentering.
Majority In Opposition
Several members said the majority of the 65 attendees-out of 62,000 Lafayette members-expressed opposition to the switch to bank and concern that directors and executives stood to gain financially from the conversion.
Both Arnold Rosenthal, chairman of the Lafayette board, and Michael Hearne, CEO, denied they were motivated by the potential riches that have accrued dozens of other insiders who changed their credit unions to banks. "I've been a volunteer for 15 years, why would I change now," said Rosenthal, according to several of the members.
But other members, at least two of whom work with Rosenthal at the U.S. Small Business Administration, one of the credit union's main select groups, suggested otherwise. "Arnie was going around telling people he was going to be a millionaire," said one member, who also works at SBA.
Disappointed With Refusal
Other attendees to the special meeting said they were disappointed that officials refused to address their concerns. Rosenthal and Hearne explained plans to raise new capital through the sale of stock, in order to build branches in northern Virginia and add ATMs. "We need to do this to continue to grow," said Rosenthal.
But neither told the attendees that NCUA had already authorized Lafayette to serve all of the city of Washington, and its 650,000 residents.
The officials also pledged not to seek any financial benefits not available to other members, but admitted the pledge is not legally binding.
John Gunning, a long-time Lafayette member, said he was not satisfied with the answers provided and planned to switch membership to the local Arlington County Employees FCU, if the switch to bank is completed. "If I wanted a bank, there are plenty of them," said Gunning. "I happen to believe in the credit union philosophy."
He did concede he will retain a minimum deposit in Lafayette in the expectation that any stock offering will be profitable, as have the previous offerings of other converted credit unions.
