An unfortunate update.
A majority of the subscribers (the effective board) recently voted to abandon efforts to charter the proposed Worker Cooperative Federal Credit Union. Those in favor will be attempting to partner with Northcountry Cooperative Federal Credit Union, in the hope of building out a worker cooperative lending component sometime in the future.
The voting was as follows:
Should the proposed Worker Cooperative FCU organizing group partner with Northcountry Cooperative FCU?
Yes – We will use existing donations of the Worker Coop FCU chartering effort, and other existing funding commitments, to take control of the NCFCU board. We will then raise at least $50k donations from among the NASCO, USFWC, and NoBAWC membership by March 31, 2013. After stabilizing the credit union with this fundraising effort, the credit union will make services available to the full field of membership of the proposed Worker Coop FCU as soon as is feasibly possible. This option will effectively end the effort to charter a new credit union.
No – We will not partner with Northcountry Cooperative FCU due to the reputational risks from potential failure after funds are committed, balance sheet risks, control risks, and other limitations. We will continue on the original mission to charter a new credit union to finance worker/housing cooperatives.
The voting was as follows
Yes – Melissa Hoover, Steven Yarak, Mark Fick, Thomas Butler, Margaret Lund
No – Mike Leung
Abstain – Dave Karoly
Did not vote – Others
Some of the background and context behind the vote is required to understand what happened. As an organizing group the the primary goal has always been to charter the proposed Worker Cooperative Federal Credit Union. During the organizing process we have at various times explored partnering with other credit unions. Typically there was no interest in worker cooperative lending or an inability to achieve our goals, and the issue was dropped. Northcountry Cooperative FCU was one of the credit unions we had discussions with.
Northcountry Cooperative Federal Credit Union is a $6M Minneapolis MN based community development credit union closely affiliated with the Northcountry Cooperative Development Fund. It is a small credit union of roughly 200 members offering only three products: savings accounts, CDs, and housing cooperative share loans. It provides no other transactional services or consumer loan products, and has no business lending program. Northcountry Cooperative FCU is run by one part time staff member and loan technician. It is currently under capitalized with a net worth ratio of 1.5% (well capitalized means a net worth ratio > 7%). Northcountry Cooperative FCU financial data can be found here (charter number 24689):
The effort to bring the proposed Worker Cooperative Federal Credit Union organizing group to the assistance of Northcountry Cooperative Federal Credit Union was led by Tom Pierson, the former North American Students of Cooperation executive director, who now sits on the board of both the Northcountry Cooperative Federal Credit Union and the Northcountry Cooperative Development Fund.
The proposal put forward was to both end the proposed Worker Cooperative Federal Credit Union chartering effort and fundraise on behalf of Northcountry Cooperative FCU. The board of Northcountry Cooperative FCU is not controlled by the subscribers of the proposed Worker Cooperative FCU, and current Northcountry Cooperative FCU board has little interest themselves in worker cooperative lending. The decision to abandon the proposed Worker Coop FCU chartering efforts now, was made with the hope that the subscribers would later be able to acquire board seats, in exchange for injecting capital, which they didn’t yet have. It is a risky and uncertain proposition, and further an improper sequence of events. That this proposal was even given serious consideration is mind boggling to say the least. Further arguments against proceeding (which were made) should have been unnecessary.
That this issue even came to a vote was indicative of a broken process. There were alternatives, such as launching a separate effort to recapitalize Northcountry Cooperative Federal Credit Union, independent of the Worker Cooperative Federal Credit Union chartering efforts. These and other solid alternatives such as leaving the existing donations for a worker coop related financing project we’re rejected for the sake of expediency. I made strong objections against partnering with Northcountry Cooperative FCU on a number of grounds. In particular, I made it clear that I would be involved in a fundraising campaign on the behalf of Northcountry Cooperative Federal Credit Union under the current curcumstances, and would remove myself form that process.
This decision also came with minimal dialogue or support from the boards or membership of the respective cooperative associations making up the proposed Worker Coop FCU field of membership. It was a major change of a strategic direction for the worker cooperative movement and substantial monetary commitment made by a small group, absent the ground work needed to create a legitimate democratic process. But perhaps most unfortunate is that a segment of the subscribers has no qualms about diverting other people’s money for purpose they did not intended. It is a severe breach of donor trust (mine included), and once broken, trust is a hard thing to rebuild.
While the process itself was flawed, I can say that the subscribers had thoroughly discussed the issues and were well aware of the implications when they voted. It still came as a shock to me that a decision to terminate the organizing efforts would come at this stage. While I sincerely hope that the efforts to assist Northcountry Cooperative Federal Credit Union will succeed, the choice to proceed in this manner was a bad decision and better options were available.
While it is a bit of a shame to have several years of work go to waste, my larger concern is what this means for the worker cooperative community and the stability required for long term organizing efforts. The conclusion that strategic objectives will be sacrificed for potentially quick and expedient solutions is hard to avoid. It is partly for these reasons that the tight financial integration and mutual assistance which foreign worker coop sectors have achieved remains out of reach domestically.
For my own massive political ineptitude in being unable to prevent this, I take full responsibility. Democracy in this case was more about politics than reason, which I failed to realize until it was too late.
Were there a possibility to continue with the chartering efforts I would gladly proceed. But in light of the recent decision, there is simply no ability to fundraise with any assurance that the donations will go to their stated cause. I have thus resigned as a subscriber of the proposed Worker Cooperative FCU.
For those that supported this organizing campaign and volunteered their time I offer my thanks, and to those who donated with the expectation that their funds would help finance worker cooperatives I offer my sincere apology. I will do what I can to rectify the situation.
As a footnote, the plan to partner with Northcountry Cooperative Federal Credit Union collapsed immediately when the board of Northcountry Cooperative FCU decided against partnering with the proposed Worker Cooperative FCU organizing group. Northcountry Cooperative FCU later merged with South Metro Federal Credit Union.
The decision to attempt to partner with Northcountry Cooperative FCU prompted a spate of resignations from the proposed Worker Cooperative Federal Credit Union. This included four of the original subscribers, Tim Huet, Dave Karoly, Newell Lessell, and Mike Leung. It later led to the withdraw of one of the three associations comprising the field of membership, the Network of Bay Area Worker Cooperatives.
The effort to partner with Northcountry Cooperative Federal Credit Union was led by Tom Pierson, former executive director of North American Students of Cooperation. Early on, Tom Pierson said that we would need to remove the staff from the website for fundraising purposes, and that we could bring them on board later when no one was paying attention. Further, he argued that website edits were a minor technical matter that did not require the consultation or consent of the subscribers. I refused and informed the subscribers.
Next I was told by Tom that due to the urgency of the situation we would need to begin fundraising on behalf of Northcountry Cooperative Federal Credit Union, without a vote by the subscribers of the proposed Worker Cooperative Federal Credit Union, much less any commitment from Northcountry Cooperative FCU. He insisted that this was not a strategic change of direction for the organizing group, therefore no vote was needed. I informed the subscribers of this effort and forced a vote.
The day before the vote, Tom Pierson told me he had multiple written financial commitments, pledging money to Northcountry Cooperative FCU. I asked to see them and was told I would not be allowed to view them for refusing to remove the staff from the website and forcing a vote on the fundraising. The text of the vote claimed there were existing financial commitments. The vote went in favor of partnering with Northcountry Cooperative FCU, and I resigned. Several days later there was a board meeting for Northcountry Cooperative FCU where they asked to see the financial commitments. There were none, much less the multiple commitments that were claimed.
Ethical misconduct can be rebuked, silently condoned, or promoted. Tom Pierson was later selected to be a subscriber of the proposed Worker Cooperative FCU.
Deceptive, anti-democratic, and dishonest conduct aside, there were other process improprieties. Typically conflicts of interest result in a voting abstention. Here, various conflicts of interest were ignored. For example Melissa Hoover was on the board of an entity with direct investments in Northcountry Cooperative FCU. And so on. . .
Integrity and process should not be sacrificed to achieve a desired outcome. One might hope for higher standards from those in leadership positions, but unfortunately it appears this sort of behavior continued to be business as usual. The disassembly of the proposed Worker Cooperative FCU field of member was not unintentional, the Network of Bay Area Worker Cooperatives was asked to leave. Apparently some members are less equal than others, and may need to be discarded.
Conduct has since continued to deteriorate to the point of harassing emails and legal threats in an effort to cover up what transpired. You can read a more selective account of the events on the new official website at wcfcu.coop.
Since it apparently wasn’t obvious, I would point out to Tom Pierson who threatened legal action, that trying to intimidate people into submission does not always work. Also, as a board members of a financial institution, its inappropriate to access members information and then use it to threaten them. It is these sorts of actions, and not their transparency, which have broader detrimental effects for the coop community. But the more harmful outcome is that over a long enough time, continued support of this type of behavior will create a Gresham’s Law dynamic for personnel selection.
The subscribers (not me) recently decided to terminate the project and are returning donations. Their conclusion was that there was no business case for a credit union, a reversal from their earlier position that there was a strong case when they decided to attempt the Northcountry Cooperative FCU partnership. The quality that conclusion is on par with the quality of their due diligence.
If you donated money please contact Mandela MarketPlace who served as the fiscal sponsor. Dana Harvey at Mandela MarketPlace who is handling the refunds can be reached at email@example.com.
There is a simple accounting of the donations. Up until the point that the donations were transferred to the remaining subscribers, none of the donated money was spent aside from fees charged by WePay, PayPay, and Dwolla.