By Ray Birch
CARLISLE, Penn.–Despite losing its effort to block the merger between $105-millon Cornerstone FCU and $450-millon Belco Community CU, the Committee for Cornerstone FCU
Independence is not resting.
As CUToday.info reported here, last Thursday CFCU members voted 1,100 to 630 in favor of the merger at a special meeting at the Comfort Suites in downtown Carlisle.
But the Committee for Cornerstone FCU Independence—headed by the CU’s former CEO Dave Keffer—remains active. The group on Monday released a statement noting that the vast majority of members at last Thursday’s meeting opposed the merger, and is now questioning how the meeting was managed by Cornerstone.
Both credit unions, however, told CUToday.info that the vote was conducted in full accordance with all rules and regulations.
In a statement sent to the media, Keffer said the Committee will look at “next steps once the full report, minutes and voting of the meeting are available and reviewed by counsel…We are particularly keen to review all events in light of NCUA Chairman Mark McWatters’ statement at the recent CUNA Governmental Affairs Conference that ‘all merger solicitation documents provide, without limitation, a discussion of any management awards and compensation agreements in plain language and delivered in a reasonable time prior to the scheduled merger vote.’”
Video Statements
Moreover, Keffer said that listening to the many members’ video statements about the meeting and the vote will also be a factor into the Committee’s future actions.
During CUNA’s GAC McWatters addressed merger disclosures as part of a 15-point list of regulatory issues the agency is working on.
The Committee in its release noted that NCUA “requires a member vote on any voluntary merger that results in the transfer of assets, liabilities, reserves and all future control of one credit union to another credit union. As a cooperative owned by the members, the purpose of the NCUA regulation is to protect the integrity of this unique financial system. The cost-free sale by Cornerstone’s board to another cooperative is not addressed in either the law or regulations. Therefore, this transaction was carried out using ‘voluntary merger’ practices last updated in 2005. Those procedures were not designed to address these aggressive business solicitation tactics.”
In its press release the Committee alleges that members were upset with how the meeting and merger were handled. “Tonight was just another snow job,” said one member. “Our board doesn’t care a damn about the members,” said another, according to the press release.
“This is the first time in my 35 years at the credit union that I have seen it not serve the members,” said Keffer.
The release alleges that Belco’s CEO and Cornerstone’s chair refused to allow the credit union press and legal counsel for the members into the meeting. “Additionally, when one member asked if the meeting was being recorded and the chair said ‘no,’ the chair rejected the member’s request to make her own recording,” the release alleges.
“When the CEO of Belco prevented outside credit union experts from entering, saying the meeting was for Cornerstone FCU members only, she was asked if she was a member. She said no, but that the Cornerstone board had invited ‘special guests,’ many of whom wore Belco logo wear,” the Committee stated.
Leading up to the final vote, the Committee provided information to members it said demonstrates Cornerstone outperforms Belco CU across numerous metrics, and that a merger was not needed to achieve economies of scale. The Committee used newspaper and radio commercials on three stations to address these points and urged CFCU members to vote no on the combination. The group also handed out literature at information sessions held by Cornerstone in February.
Before the vote, those standing in line to register received handouts from the Committee showing Cornerstone FCU was the No. 1-rated local financial institution in Carlisle—including a full-page ratio comparison pointing out that Cornerstone outperformed Belco on measures of member value, such as lower loan rates, fewer and lower fees, and an expense ratio over 30% less than the acquiring credit union.
“After shutting down discussion before all members could speak, the meeting was adjourned to record votes that were added to the ballots previously received by mail,” the Committee alleged in its release. “NCUA rules require that the final tally be reported separately: those who voted for or against the merger by mail ballot and those who voted for or against in person. Only a single combined tally was announced: more than 1,100 votes for the merger and more than 600 against.”
“I think it’s a case (referring to the final vote outcome) when people were asked to send in a choice without the people knowing what it meant,” said “Curt”—a member since 1975 who had also served 12 years earlier on the Cornerstone board—in the release.
Keffer said he was grateful that so many had taken hours of their time to learn more before voting.
“It shows how the members really feel when they have an opportunity to hear all points of view. It demonstrates how misleading votes mailed beforehand can be as a measure of member sentiment,” Keffer said.
Meeting Run Correctly
The only information about the merger in the Notice for Thursday’s meeting was the board’s pro-merger recommendation, the Committee asserted.
Both CU leaders emphasized to CUToday.info that the meeting was run correctly and that members have been communicated to effectively since the announcement of the proposed merger.
“An independent third-party auditor gave out the ballots, organized the ballot—so no one from either credit unions were involved with the balloting,” said Cornerstone CEO Sam Glesner. “And we did go as far as bringing in a parliamentarian to make sure we ran the meeting correctly.”
“We are very confident that we followed a very fair and democratic process at the meeting, and with the entire voting process,” said Belco CEO Amey Sgrignoli. “We understand and we have addressed concerns individual members have raised and we will continue to do that as members have questions and come in. At the end of the day the beneficiaries of this merger will be the combined memberships. I want to be clear that we share Mr. Keffer’s passion for credit unions and we are committed to the members. This merger is a proactive step toward building a strong future for our credit unions. This is a collaboration among cooperatives—one of the seven cooperative principles.”