IGA Federal Credit Union, a credit union for Peco Energy employees in Pennsylvania, converted to a mutual savings bank in 1998. A recent three-part investigative report by The Philadelphia Inquirer revealed that the merger was in motion before the official conversion.
The institution was the first former credit union in the U.S. to sell stock, raising over $14 million. The IGA conversion recently garnered attention in Pennsylvania because of controversy with the involvement of a state Senator, Vincent J. Fumo. Currently Fumo serves as chairman of PSB Bancorp, which purchased IGA Federal Savings in 2001.
The investigation delves into the complexities of converting to a bank, the legality behind bank mergers and stock sales, and the grey area created when trying to straddle the political and corporate worlds.
A brief synopsis of each article is listed below with a link to the full text. All articles are available after creating a free account.
Part 1: Banking on power
The first part describes Sen. Fumo’s second job as a banker and sets the stage for the controversy over the merger plans preceding the official conversion. The Inquirer reveals the document trail of the merger talks including memos, faxes, e-mails, reports and handwritten notes as well as the publicly-available, official documents filed with the regulatory bodies.
In addition, the article provides perspective on salary and payments by comparing the payouts to those of other Pennsylvania banks. Fumo received other perks in addition to salary including discounted loans and an expensive car.
Part 2: A fast-moving and enriching merger
Sen. Fumo’s bank bought IGA Federal Savings in 2001. The Inquirer’s investigation tracks Fumo’s personal investment in IGA as well as the investments of other legislators beginning in 1999 when Fumo’s bank was exploring the idea of purchasing the credit union.
While the stock purchases by Fumo and the other legislators were legal, the investment raised eyebrows. However, the race to merge conflicted with federal rules prohibiting new banks from planning mergers before they go public.
Part 3: A bitter brawl over stock options
PSB Bancorp wiped out approximately 1.37 million options worth $3 million, the catalyst for the heated legal battle. At stake not only is the money involved with the options but also the potential for increased power Fumo and other shareholders could wield if the options are erased.