Shareholders Vote To Sell Off A ​“Unicorn”

This time there were no crowds, no balloons. Just a handful of men in a conference room deciding the fate of a company that once symbolized New Haven’s gamble on creating the jobs of the future.

The men gathered for just a few minutes in Conference Room 111 Monday morning on the first floor of the Google-like Science Park headquarters of Higher One Holdings, Inc., the financial services company that works with colleges and universities across the country.

Technically the occasion was a Higher One shareholders meeting. Though shareholders weren’t in sight. They sent in their votes in absentia.

The low-profile briskness of the gathering belied the gravity of the business at hand: Higher One was formally voting on a $37 million sale of its trademark business — the disbursing of financial aid to students through, among other means, a special debit card account.

Late Monday afternoon the company reported in a federal filing that the deal was approved at the ​“meeting” by 35,190,113 to 9,868 votes, with 10,868 abstentions. (The vote totals are based on shares, not individual shareholders)

The lopsided margin of approval was reflected in the absence of any potential critics or skeptical shareholders showing up to the meeting Monday morning. The company that symbolized New Haven’s and Connecticut’s efforts to create new-economy jobs of the future is becoming one more local division of an out-of-state bank, struggling to stay alive after years of scandal.

Monday’s hush-hush non-theatrics were a contrast to the formal opening of the six-story Higher One headquarters in 2012. The governor and mayor joined a crowd of muckamucks in the bright, airy main lobby to cut the ceremonial ribbon on the renovated former Winchester rifle factory building, into which the state funneled more than $20 million in tax credits as part of the quest to create jobs of the future.

Also long gone were company founders Mark Volcheck and Miles Lastater, who as undergraduates invented their product in a Yale dorm room. They built the company by enlisting hundreds of colleges and universities across the country as clients, figuring out that the schools needed help getting tuition refunds electronically to students instead of having them wait hours in line for paper checks. Their dream was gradually shattered by a shareholder lawsuit and two federal investigation into deceptive business practices, which led to the company agreeing in December to pay a $2.23 million civic penalty. Earlier, in 2012, Higher One agreed to return about $11 million to college students for overcharged fees, and agreed to change the way it imposes fees and provide clearer disclosures. (This Connecticut Magazine article by Christopher Hoffman offers an in-depth look at the company’s decline.)

The sale voted on Monday is part of a strategy to turn the company around. Pennsylvania-based Customers Bancorp will assume ownership of one of two Higher One divisions: the one it’s best known for, electronically disbursing financial aid to students and allowing them to accept the payments through special Higher One accounts. This part of the Higher One business becomes a division of the bank, with a new name: BankMobile.

Having Bancorp take over this division made strategic sense, said Higher One Vice-President for Corporate Communications Shoba Lemoine: ​“It’s a bank. It has a bank charter. It maintains the integrity of the service.” Higher One is not a bank, although it also was overseen by federal regulators.

Higher One will remain in business as an independent company carrying out the other half of its business: designing software systems for colleges and universities to accept payments, from tuitions to book sales.

The two divisions will remain in the Winchester Avenue/Munson Street headquarters, at least for now, according to a company release.

The company has no plans to lay anybody off, according to Lemoine; all employees of the new division are being offered positions with the bank. The company claims that for the foreseeable future it will keep the 250 current employees in New Haven; the two divisions employ around 550 people total in all its locations. The company services 1,500 campuses with a total of nine million students, according to Lemoine.

One change: The building will be retrofitted to separate employees of different divisions on different floors. The divisions are currently comingled. ​“There will be no information sharing,” Lemoine said.

The people entering the building Monday morning were headed to work, not the shareholders meeting. They said they couldn’t comment on the sale, which one employee did call ​“sad but true.”

City Economic Development Administrator Matthew Nemerson called the company ​“an iconic example” of new-economy ​“unicorns” drawing billion-dollar investments with big dreams for creating jobs.

“Unicorns are hard to catch,” he said. ​“When you catch them, they sometimes disappear in a cloud of smoke. It was a great company for a while; my focus now is going to be on keeping them in town.”

Nemerson said city officials had a meeting scheduled three weeks ago with officials from the new bank. The meeting was canceled.