March 2012        

Assault on credit unions


On Friday 15 January the High Court appointed Luke Charlton, a partner in Ernst and Young, as special manager to Newbridge Credit Union. At that hearing the board was silenced by the High Court under pain of a fine of €100,000 or a three-year prison term, or both. They were not allowed to speak to the workers, the members, the media, or the public.
     I cannot understand why the same rules did not apply to the Central Bank, the credit union regulator and the Department of Finance, one of which broke the news to KFM as Charlton and his eleven suits marched into the credit union. The directors were given seven days to appeal this decision.
     What is most interesting about the actions of the Central Bank is the law that was chosen for investigating this perceived problem in Droichead Nua. This is the first time that commercial company law has been used in this manner. There are sections of the Credit Union Act (1997) that could have been used by the credit union regulator or the High Court for examining the credit union’s books.
     What is not being reported in the media is that the high wages being paid to the suits—from €150 to €423 per hour—are being paid by Newbridge Credit Union. If my sums are correct, based on an eight-hour day and a five-day week, Luke Charlton will be paid €439,920 for six months. In the meantime the number of people from Ernst and Young has increased to fifteen.
     In his letter to members of the credit union Charlton stated that it was his intention to carry out business as usual, to provide an initial report to the Central Bank, to ascertain the role of the directors, and to develop a business plan. He went on to say that all the functions of the directors are vested in him, and that Newbridge Credit Union cannot be wound up without the consent of the Central Bank.
     He reminded members that they own the Credit Union; yet all democracy has gone out the window, as the owners had no say in his appointment or his wages. The owners still do not know why he was appointed in the first place; and, needless to say, speculation is rife.
     Newbridge Credit Union is one of the largest in the country, with 30,000 members. It has steadily reduced its dividend to savers since 2008, when it paid out a generous 4½ per cent to mark its fortieth anniversary. At the end of 2010 that figure was reduced to 1½ per cent, while the figure for the end of 2011 remains to be seen.
     Three years ago the regulator imposed an auditor—at the cost of €100,000—on the credit union. If there were problems, surely this auditor would have known about it?
     The most serious issues for the credit union movement as a whole are the following questions, which need to be answered: • Would the action in Droichead Nua have anything to do with the €15 billion in savings in credit unions throughout the country? • Would it have anything to do with the credit union regulator’s intention to consolidate the 430 credit unions in the country to 100?
     The credit union movement is one of the last bastions of democracy in this country. Each credit union has a distinct and important role in Irish society and has close links to local communities, in which it plays a vital role, giving people access to affordable credit. The loans and dividends paid out are spent in the local economy; the board of directors of each credit union stems from their local community; they support their communities through sponsorship and donations to clubs and organisations; and they provide employment in their locality.
     The trade union movement must protect the credit unions from any changes that the Government would impose on them.
[TM]

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