MUSSELBURGH & Fisherrow Co-op Chief Executive Tom Lees and President Jean Whitehead are at the centre of allegations that they were key players in the recent failed attempt to demutalise the society.
The controversial privatisation process was halted by Edinburgh Court of Session judge Lord Kingarth, so a planned confirmatory meeting called to rubber-stamp the previous overwhelming vote in favour of converting to a limited company never took place.
And with the society's procedures and governance now under investigation by the Financial Services Authority and the board currently inquorate due to resignations, the society is in a state of limbo.
The legal moves to block the proposed demutalisation were initiated by a group of concerned Musselburgh members including former President George Cunningham and ex-Chief Executive Peter Henderson.
Assisted by officials from Co-operatives UK, the group won a court injunction to halt the privatisation plans at least until the FSA inquiry is complete. In practice, Lord Kingarth's decision – which also saw the society ordered to pay the costs of the hearing – means that the process will have to start from scratch and could take months if not years given the state of the society's membership records, which one insider described as "a shambles."
According to the 19-point petition lodged with the court, the society's Chief Executive Mr Lees, President Jean Whitehead and two directors who are also employees – Patricia Jamieson and Barbara Archibald – were heavily involved in the plan to demutualise the society.
The petitioners also allege that as Ms Archibald works in the Chief Executive's office and is directly accountable to Mr Lees, she is ineligible to be a director. Other concerns centre on a special meeting arranged to permit proxy voting, notice of which was not sent to members by post; the alleged refusal of Mr Lees to allow the then Secretary Audrey Cowan to inspect the society's Register of Members in August – and the issue of Musselburgh & Fisherrow's disappearing membership, apparently down from15,375 in 1997 to 1,080 now.
According to the petition, a circular sent to members in July said that a cash payment of £ 500 plus five times share value would be payable to those who supported conversion. It was calculated by the petitioners that if every member took the cash for conversion option the total sum distributed would be £ 1,525,480.
However the society's net assets at the end of January were £ 6, 745,943, so those members who opted to become shareholders of the new company would benefit by accruing assets worth over £ 5.2 million.
It is alleged that a subsequent circular in August made it clear that Mr Lees and Mrs Whitehead would be taking shares in the proposed new company and, following distribution of the information, it is claimed that Mr Lees personally cold-called society members to discuss the proposed conversion.
The fact that the Musselburgh board, which currently only has three members including the society President, is inquorate means that issues that need boardroom approval cannot be dealt with at present.
The News understands that one option for the society would be to apply to the courts for permission to appoint a Judicial Factor to run the business pending the outcome of the ongoing FSA inquiry.
Neither Mr Lees or Mrs Whitehead were available for comment.