Hedge Funds Seek To Cash In On Conversions

WASHINGTON - The prominence of the Lafayette bid, which was supposed to culminate in the sale of stock in an initial public offering, attracted many professional investors and other speculators.

In a phone conversation with the Credit Union Journal, one hedge fund representative said his fund had made deposits in at least two converting credit unions and was seeking to establish membership in Lafayette FCU as it was switching to a mutual thrift.

A review conducted by NCUA uncovered as many as a dozen professional investors, speculators, who were able to establish membership in Lafayette through one of its select groups that have liberal membership standards. The speculators reportedly include a former president of one of the Federal Home Loan Banks, sources told the Credit Union Journal.

Credit unions that convert to a mutual savings bank, then sell stock to the public usually give their former credit union members first crack at the stock before selling to the public at large, giving the former members the initial chance at any profits from a run-up in the stock price.