Lafayette Federal Credit Union's abrupt decision to abandon its plan to convert to a bank is the second straight victory for the National Center for Member Trust, a little-known organization that helps mobilize opposition to credit union conversions.
The $330 million-asset Lafayette in Kensington, Md., scrapped its conversion plan Friday, a week after election inspector RSM McGladrey Inc. withdrew its certification of a Dec. 16 vote in which members voted for the conversion to a mutual thrift charter by a margin of 18 votes.
A vocal group of members had opposed the conversion plan since Lafayette unveiled it in June, arguing that it would ultimately enrich officers and directors but was not in members' best interests. These members immediately challenged the integrity of the Dec. 16 vote on grounds that documents related to the election were "inaccurate and misleading."
The National Center for Members Trust, which was founded by three credit union executives in March 2006, had quietly supported the opposition group since September by supplying the legal language for its petition to recall Lafayette's board and facilitating the creation of its Web site, www.savemycreditunion.coop. Before that, the group funneled more than $25,000 to DFCU Owners United, a group of credit union members that torpedoed a conversion plan at the $1.8 billion-asset DFCU Financial Credit Union in Dearborn, Mich.
Randy Chambers, an NCMT leader and the chief financial officer of Self-Help Credit Union in Durham, N.C., said Tuesday that credit for the successful opposition campaigns belongs mainly to the members - not his organization.
"We helped provide resources that helped the members effectively communicate with each other," he said. "And if that made a difference, we're pleased that it made a difference."
But Michael Hearne, Lafayette's president and chief executive officer, said the NCMT's impact was much more tangible.
"Definitely, they had an adverse impact on the process by passing false and misleading information and portraying themselves as protectors of the credit union movement when really they're just trying to protect themselves," he said Tuesday.
The group's strategy was to put in members' minds "this idea that the board is trying to steal from you," he added. "If you take a look at what they've been providing to our membership, it constantly swirls around insider enrichment and disenfranchisement - all things that were blatantly not true."
He also said he was troubled that officials from other credit unions would get involved in Lafayette's affairs.
The developments at Lafayette and DFCU Financial reflect the increasingly organized efforts of conversion opponents, said Keith Leggett, a senior economist at the American Bankers Association.
"What has happened is that people who are opposed to these conversions have … learned what works and what doesn't work, and they've built upon this," he said.
The decision to withdraw the plan had nothing to do with charges of voting irregularities alleged in letters from members to the National Credit Union Administration, Mr. Hearne said. "This was simply problems in the tabulation process which occurred totally outside the purview of Lafayette," he said.
As a result of these errors, "it was the sense of the board that the integrity of the process had just been compromised to the point where we believe it to be irredeemable," Mr. Hearne said, adding that he is considering legal action against McGladrey.
McGladrey spokesman Rick Hagen said the firm's policy "is not to discuss the details of our work, and we are unable to provide any specifics regarding the situation at this time." The company will "provide additional information as we are able," he said.
