It is Darkest Before the Dawn
March 2004
This whole business with Parmalat caused quite a stir in Italy. The company’s CEO, Mr. Calisto Tanzi, embezzled millions of dollars for his own personal benefit throughout the last fifteen years. It’s true; this respectable gentleman is a thief! Highly regarded barely a few weeks ago, Mr. Tanzi is now behind bars with about ten of his associates. Who would’ve thought? Meanwhile, on this side of the Atlantic, this scandal-ridden story echoed the whole Enron fiasco, which resulted in the downfall of the Anderson auditing firm.

I remember researching good business practices and I came upon a very interesting article written by a respected authority in this field: Anderson. A few months later, Anderson and Enron were no more.

No company is ever completely protected from fraud. Not even cooperatives. Allow me to refresh your memory and recount the unbelievable story of a renowned British cooperative, the Cooperative Wholesale Society (CWS), and its fight for life. First, it’s important to know that CWS merged, with other consumer cooperatives, and espoused the heritage of the Rochdale Pioneers, the first cooperative founded in 1844 that was to become a model for all other cooperatives, by embodying the purest cooperative values. Among CWS’ components was the Co-operative Bank, renowned worldwide for its exemplary practices in terms of social accountability. In 1995, Graham Melmoth was the Chief Executive Officer of CWS and was also head of the International Cooperative Alliance (ICA). In 1997, Melmoth quits ICA to save CWS from a rather ingenious attempt at a hostile takeover. The cooperative world is in shock. How could this have happened?

This is a complicated story, but let me summarize the basic course of events. Andrew Regan, a businessman, and his associate want to make a quick buck. They form a company and join CWS. They receive all the information usually distributed to members and are instantly introduced to the cooperative’s workings. Then, they fuel and feed rumours that potential buyers are interested in CWS’ assets. Newspapers jump on the bandwagon and go as far as to suggest a possible amount of money members could be pocketing, which of course arouses the underlying greed that dwells in the heart of those who view their shares as tradable stocks. In the meantime, Regan is attracting speculators from Monte Carlo and the British Virgin Islands and begins selling off pieces of CWS, which they’re already planning to dismantle. Only one formality remains: a special meeting that Regan will legally convene with the assistance of a handful of members, where they will deal with the issue at hand: the demutualization of CWS!

Such a devious and well-calculated plan… Thank goodness it was interrupted. Melmoth, finding Regan particularly well-informed, initiated surveillance and discovered that a senior director for CWS was indeed channelling committee minutes, strategic plans and detailed budgets. The investigation intensified and more accomplices were unearthed, a second senior director. Proof in hand, they headed to the courts where they pleaded that a large quantity of important information was being fraudulently disseminated. Thus, Regan was ordered to immediately stop and desist any and all transactions. Just in time, with barely one minute ‘ill midnight.

Just goes to show. Never would anyone have imagined that such a tale of intrigue and swindle could have befallen the direct heirs of the Rochdale Pioneers. Well, it happens in the best of families! What’s happened since? Well, Melmoth retired in 2002 and was knighted that same year. Legal proceedings are ongoing. And CWS has been taken under the wing of The Co-operative Group, a group of companies that is primarily involved in food distribution and financial services. The long lost cooperative pride finally returned and financial results are better than ever. There are close to one million active members. And you know what? Cooperative education is now widely accessible. The cooperative distinction is now at the forefront. No longer will member indifference be tolerated. Never again. “Every cloud has a silver lining”: by revealing how little attachment members actually felt, this fraudulent episode sounded the alarm that it was time to open a new dialogue in this stately cooperative institution. And today, it has been literally and completely revitalized.

Colette Lebel, agr.
Director of Cooperative Affairs
La Coop fédérée
Fax: (514) 858-2025


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