Nationwide Insurance ripoff of its own credit union members for its new banking subsidiary Columbus Ohio
Nationwide Insurance long sponsered a large and successful credit union for its associates. Known as the Nationwide Federal Credit Union, it provides many banking services at low or no cost to its members, while paying favorable interest rates on deposits. The credit union is wholly owned by its members, who vote on directors and major policy.
It turns out that the credit union is worth quite a bit of money to someone who wants to start a bank and get a fast start on things.
Now, Nationwide is going into the banking business by forming Nationwide Bank and wants to acquire the credit union by paying the members a 15% premium on their balances on deposit as of the end of March. Sounds pretty good until you read the newspapers and see what other banks are paying to acquire similar financial institutions -- over 30%!
Specifically, National City Bank, in Cleveland, is paying over 30% on assets to the owners of two Florida institutions so that it can get started in that state. Makes you want to ask how Nationwide and the credit union agreed on 15%, less than half the going market rate.
Well there are a couple of major factors that went into this low bargain price: One is that there were no outside consultants working on valuing the credit union -- the price was entirely cooked up inhouse. Two is that the individuals representing the credit union in the negotiations are all paid by Nationwide itself, in salary or pensions.
There was absolutely no independent valuation of the transaction. The members were sold out by Nationwide's own henchmen.Now the members are out in the cold. They can either accept a paltry payment of less than half the market value for their credit union, or watch it whither away as Nationwide pulls its support in favor of its own business interests.
This is a major rip-off of Nationwide's own employees and credit union members. There is still time left to do something before the November 2006 vote of the members.
Jim
Columbus, Ohio
U.S.A.
2 Updates & Rebuttals
Jim
Gahanna,Ohio,
U.S.A.
The rip-off is the 15% price offer.
#3Author of original report
Mon, October 02, 2006
Lee raises several interesting points all of which are quite valid. What he misses is the fact that the members' ownership is worth more than $30 per $100 on deposit and Nationwide is paying only $15 per $100. That is less than half.
That is what the rip-off is all about. The members have no real alternative, and Nationwide knows it. That is why they feel they can get away with the way below market offer.
I don't like being forced to sell what I own for less than half of what it's worth!
Unfortunately, the credit union members will never get together on this. It will probably be approved in the vote. But if it does, watch the class-action attorneys jump into the fight because clearly, there was no independent valuation process that proves that 15% is a fair price in a 30% market.
Lee
Columbus,Ohio,
U.S.A.
Nationwide Bank Merger
#3UPDATE EX-employee responds
Sun, October 01, 2006
Thanks for the info Jim. I never saw it that way. I do know banks earn millions of dollars in fees from customers. With the credit union, membership was restricted. Now with Nationwide Bank, anyone can get an account. Nationwide is going to earn a lot of money.
The CEO came from a bank. So has many other VP's, Officers, and Directors. This has been long in the making. We just didn't know about it.
In my opinion, it's a great business decision. The CEO will be greatly recognized for its success. It's just unfortunate that employees are detached from 'membership' status and downgraded to 'customers' with the rest of the outsiders.
My guess is Nationwide put a lot of time and money into this idea. With that in mind, the Nationwide Bank merger will be approved by the credit union members. There is no independent company counting ballots. I guess the event of Bush/Gore drama with 'butterflies' or 'hanging chads' will tilt toward approving the merger.