Student employee sues directors for conflict-of-interest charges
The Board of Directors of the Rutgers University Student and Alumni Federal Credit Union want to merge with the Rutgers Federal Credit Union, but some members of the board allegedly stand to benefit by eliminating the student credit union.
"This [merger] is a back-door deal that not only benefits these people, but hurts [the student credit union, which] is run entirely by students," said a member of RUSAFCU, the student credit union, who wished to remain anonymous. "We want to see the student credit union remain on campus and continue to be run by the students."
Student Credit Union Vice President of Member Services Aimee Becker and Student Credit Union Member Stanley Bozin, a retired United States Navy admiral, sued the Student Credit Union Board of Directors on behalf of all 2,700 members of the student credit union last week in a class-action lawsuit.
"[The student credit union looks] out for students in a very cost-effective way with our current system, and the replacement will not have the students' interests in mind," Becker said.
A credit union is a not-for-profit financial institution organized, owned and operated by their members, according to the student credit union Web site. Earnings above operative expenses are returned to members through lower rates on loans and higher interests on saving accounts.
Last month, the Student Credit Union Board of Directors voted and agreed to propose a merger with the Rutgers Federal Credit Union, also called the faculty credit union, said Becker, a Rutgers College senior. But out of the legally required five members of the Board of Directors, four should not have taken part in the vote.
Student credit union Board of Directors members who voted for the merger were Vice Chair Thomas O'Shea, Treasurer Michael Reilly, Secretary Jeffrey Miller and Director Michelle Featherstone, Becker said. Chairman Ken Buren was absent from the meeting.
The faculty credit union rents space from the Second Reformed Church of New Brunswick, where O'Shea is a member of the congregation, Becker said.
O'Shea is also the CEO of Aspire Federal Credit Union, which committed an investment to Fynanz private student loan program. Before the vote to merge with the faculty credit union, O'Shea made an agreement with Fynanz to offer private loans to University students, she said.
O'Shea declined to comment.
"If the merger goes through, under the leadership of the faculty credit union, the student credit union will not be able to give loans to students," said the anonymous member. "Fynanz will be there instead."
Becker said the origination fees paid to Fynanz for student loans are more than what is paid to the student credit union.
Reilly was the other Board of Directors member in an alleged conflict of interest.
Becker said Reilly is in the Board of Directors of the New Jersey Credit Union League, which has a marketing agreement with Fynanz. They compensate the league for promoting their private student loan program.
"If the merger happens, the NJ Credit Union League would be paid dividends for the investment in Fynanz," she said.
The two remaining members who voted for it are allegedly ineligible to be on the Board of Directors since they did not have accounts with the student credit union during the time when the intent to merge was up for vote, Becker said.
If Becker does not win the case, the vote to merge will be up to the members to decide during a student credit union meeting of all members in December, she said.
"The meeting is on Dec. 11 at 3 p.m. which is the final day of the fall semester before exams," Becker said. "At a time when everyone is busy with different things, probably no one will be able to show up to vote against the merger."
The next court date is to take place on Nov. 19, she said.
"There is no comment by the Rutgers University Student and Alumni Federal Credit Union on the pending litigation," said Miller, who said he is the current Board of Directors' acting chair. "We are aware of what is happening. We hope to have everything sorted out in the best interests of the credit union and its matters."
Aside from the Board of Directors — who allegedly individually look to benefit from this deal — is the faculty credit union, who apparently have a reason to look favorably at this merger, Becker said.
The Federal Credit Union is at a loss this year while the student credit union has a rising amount of members, she said.
According to the faculty credit union's Financial Performance Report, their membership declined by at least 25 percent last year.
The student credit union membership rose by 16 percent, according to their report.
While the faculty credit union has a lot more money than the student credit union, it stands to lose $1.2 million of their net assets as part of a mortgage fraud committed against them by U.S. Mortgage Corp.
Becker said they need an investment in capital to get away from their precarious position, so a merger would be favorable to them.
The faculty credit union is located in a rent-free space on Busch campus, the anonymous source said. In the University's current fiscal condition, they may begin to charge rent to the faculty credit union.
If Becker wins the lawsuit, members of the Board of Directors will have to step down, the members of the student credit union will elect a new board and the intent to merge with the faculty credit union will be nullified.
"We want to provide opportunities for students in a cost-effective manner for everyone," Becker said. "This merger under these terms won't be beneficial for students."