MONTPELIER, Vt.–The former CEO and four former board chairs at Vermont State Employees Credit Union have published a joint letter calling for members to vote against a proposed merger with New England FCU, suggesting more than a million dollars has been spent to date to suggest the “merger will somehow produce more of everything and everything will be better.”
Members of the $1.092 billion Vermont State Employees CU are scheduled to vote on Nov. 8 on the combination with the $1.96 billion New England FCU in Williston, Vt., according to documents newly filed with NCUA. If the merger is approved, the two credit unions said in their disclosure statement that they plan to rebrand the combined CU. NEFCU CEO John Dwyer would be CEO of the merged CU; VSECU CEO Robert Miller would be president/COO.
The credit unions said there will be no merger-related compensation paid to members of the board and management at VSECU. As of June 30, VSECU reported $4.523 million in net income, with capital of 9.22%. Although it’s nearly twice the size of VSECU, New England FCU posted net income of $2.821 million, with capital of 11.89%.
The new statement is just the latest effort by former management and board members at VSECU in opposition to the proposed combination. As CUToday.info reported here in April, the effort has been ongoing through much of this year.
‘Defeat This Merger’
Writing on VTDigger.com, former VSECU CEO Steven Post and former VSECU board chairs Jerry Diamond, Kimberly Cheney, Wally Farnum and Bob Shattuck, who are part of a group called “Calling All Members,” are urging VSECU’s membership to “defeat this merger and to preserve the VSECU as an independent statewide financial cooperative built by Vermonters, for Vermonters.”
“The current VSECU leadership has tried to portray the Calling All Members founders as too old to appreciate how rapidly the industry is changing,” the group’s post reads. “Yet the industry has been changing rapidly for a long, long time and each of the founders, along with many other volunteers and employees, worked to build an organization that was capable of meeting the challenges of a dynamic marketplace.
‘Abandoned the Vision’
“It is the current leadership that has abandoned the vision and mission of the VSECU and is proposing to turn control of our credit union over to the New England Federal Credit Union board of directors. We think that is wrong, and that VSECU members should soundly reject this merger proposal,” the post continues.
The group wrote that Calling All Members has spent “several months exposing the procedural flaws that have resulted in this unjustifiable proposal.”
“From conflicts of interest to withholding information to providing false information, to stacking the board, to decision making without internal discussion, to substantial executive payouts if VSECU ceases to exist, everything about this campaign has troubled (and even insulted) many of those who worked to create a member-centric, democratically controlled institution that could stand the test of time,” the web post continues. “VSECU members are now being inundated with surveys and marketing material in an effort to sell this idea. We estimate that if all the costs were ever to be fully disclosed, the price of this initiative would be close to $1 million of the members’ money. With flashy slogans like ‘Leading from the Future’ and ‘True to Vermont’ the relentless campaign is based entirely on bigger is better, and that the merger will somehow produce more of everything and everything will be better.”
The group opposing the merger said in their posting on VTDigger.com that they lack the resources to compete with VSECU, but they are hopeful members will “stay tuned” and then “vote NO.”
What VSECU Members Are Being Told
In its disclosure statement to members filed with NCUA, VSECU said in listing its reasons for seeking to merge, “The Board of Directors has a legal and fiduciary duty to act in good faith and in the best interests of VSECU's membership. In carrying out these duties, our Board of Directors has concluded that the proposed merger is beneficial and in the long-term best interest of members today and for future generations. Although both credit unions are financially strong, they face many of the same obstacles and challenges, including an aging Vermont population with slow to no growth; rapid and accelerated technology challenges; environmental, economic, and social change; and increased competition from out-of-state financial institutions.
“By combining VSECU and NEFCU’s collective 135+ year experience in servicing Vermonters and shared mission of empowering and improving the lives of members, the combined institution will continue to offer a local alternative to big banks more in-touch with the financial needs of its membership while being better equipped to tackle the challenges facing financial institutions in a rural state,” the statement continued.
‘9 Reasons to Vote No’
In their post, the former CEO and chairmen said the reasons they believe VSECU members should vote against the merger include:
- “The vision of a not-for-profit democratically controlled financial cooperative focused entirely on serving Vermont and Vermont communities will be lost forever if this merger happens.”
- Local control will be lost. “VSECU is regulated by Vermont. New England Federal Credit Union is regulated by Washington. Vermonters have always favored the local solution.”
- VSECU’s distinctive statewide field of membership and focus will be lost as New England Federal Credit Union expands to areas and groups outside Vermont.
- “This merger does not produce any new products or operational capabilities. Each credit union offers different versions of the same basic banking products. VSECU is already a full-service institution. If this proposed merger takes place, Vermonters will actually experience fewer options for banking services, not more.”
- “New England Federal Credit Union is essentially acquiring one of its major competitors — for free. The merger is being sold as a ‘partnership,’ but that is just a marketing ploy. New England Federal Credit Union is acquiring VSECU. It will gain 72,000 members, $1 billion in deposits, $90 million of VSECU members’ equity plus many millions of dollars of real estate, and eliminate a major competitor, all at the expense of VSECU members. Vermont’s cooperative financial services industry will be weaker, not stronger, if this merger proceeds.”
- “Large financial services providers like Chase, Walmart and others will not be impacted at all by the so-called ‘scale’ that this merger will produce. If anything, by having one institution to compete against instead of two, large banks and others will have an easier time in Vermont.”
- “There are alternatives to merger that will help achieve operational efficiency without destroying a 75-year-old healthy, strong and unique cooperative. Many credit unions around the country have maintained their independence while entering partnerships that tackle every banking challenge. Known as Credit Union Service Organizations (CUSOs), this approach to cooperative banking in Vermont would be far more beneficial than this merger.”
- “VSECU members will lose control of the assets that have been accumulated over its 75-year history and will lose the financial self-determination achieved thus far.”
- “The way to defeat big banking has always been to create a unique brand, deliver quality products and exceptional service. That is what VSECU achieved over the years with much success. The notion that bigger is better and that bigger is stronger is a fallacy that Vermonters have dismissed for years.”
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