Co-op clamps down as the carpetbaggers roll up

The Co-operative Wholesale Society (CWS), Britain's biggest Co- op, has become the latest mutual organisation to clamp down on "carpetbaggers" following a rush of applications to become members in the hope of a pounds 1,000- a-head windfall.

Applications to become members of the CWS, which can be done by putting as little as pounds 1 in a savings account, have risen five-fold since the claim by a potential predator that there could be pounds 1,000 windfalls in the offing.

The CWS has now centralised the processing of applications, and says it will reject applications for membership that "do not have the right motivation". It says it will vet applicants to make sure they have an "affinity with the Co-op movement". The move follows legal advice aimed at preventing it from being swamped by bonus-chasers.

Martin Henderson a spokesman, says the rules have not been changed, but will be applied more strictly. "Anyone can become an individual member of a Co-op society provided the local Co-op society approves their membership. Pay a quid and you join, but your application should go before the board of the society before you are admitted as a member."

Where applicants do not live in areas served by the CWS their membership will not now be accepted. To join it is necessary to fill out an application form available in most local Co-op outlets, but in theory these application forms have also been obtainable by post.

The CWS has a diverse network of shops across much of the country. It also owns the Co-operative Bank and the Co-operative Insurance Society, but accounts and policies sold under these two brands do not give membership rights.

The bank and insurer are among the parts of the CWS believed to be in the sights of its stalker, Andrew Regan, and his Lanica Trust.

The CWS board has said that it is not interested in talking to Mr Regan. But the move to clamp down on carpetbaggers will be interpreted as a further sign that the CWS is taking the takeover threat seriously and it is likely to prompt further account openings.

However any unwelcome takeover bid is likely to be made even more difficult by the CWS's structure. The majority of CWS directors represent other Co-ops that are themselves dependant on the the CWS. And although votes to elect directors are part and parcel of the Co-op movement, in practice replacing directors opposed to a takeover could take years.

"Nothing in this world is impossible ... but what Regan is trying to achieve is close to impossible," claims Mr Henderson.

The CWS is just one part of the Co-op movement and for windfall hunters to maximise their chance of sharing in any break-up they should apply to become members of as many Co-ops as is practicable.

Indeed some other Co-ops might prove better bets. For example, the Ilkeston Co-operative Society, in Derbyshire, admits that it discussed the possibility of converting into a mainstream company at the start of last year, although the idea was rejected unanimously.

Tony Teatum, the chief executive, says: "Conversion may not be as difficult as you think ... if my members say they want to convert then I am bound by what my members and board want." If the directors blocked a conversion move supported by the members there could be a general meeting called to evict the entire board and replace it.

Co-operative Retail Services, the other giant of the Co-op movement, has also seen a five-fold increase in applications recently. But it regards the possibility of a takeover as so remote that it is happy to take money from anyone who wants to join.

Where it normally receives 500 new applications a week, the figure is now 2,500. But total membership of the society is 1.4 million and the CRS believes most of these would oppose conversion. Like CWS, it could take years to change the board directors but, unlike the CWS, it could be vulnerable to a vote of no confidence in the existing board tabled by members.

As well as possible windfalls, interest rates on offer from Co-ops are often very competitive. The Oxford, Swindon and Gloucester Co-op Society is offering 6 per cent interest rate on as little as pounds 200, while the CRS will pay 5 per cent on just pounds 1.

If many Co-op societies demonstrate a relaxed attitude towards possible oblivion, it is partly because they are well-connected politically, with their Co-operative Party affiliated to the Labour Party and sponsoring many Labour candidates.

"We will have well over 20 MPs in the House of Commons [after the election], and we are not going to sit idly by," says Peter Clarke, national secretary of the Co-operative Party. Instead, he expects a Labour government to pass a Co-operative Act that would help societies to trade more effectively and make it more difficult for them to be taken over. "We have heard the assurances, and we have got it in writing," he adds.

No one really knows how existing members would balance Co-operative principles against a possible pounds 1,000 "bribe".

Until it happened few people believed the building society movement could be transformed in the way it has. For punters with patience, a few quid in a Co-op society could still prove one of the most lucrative investments on offer, if the societies allow them to join.