The $545 million Memphis Area Teachers Credit Union, shaken by last spring's management upheaval marked by the resignation of the CEO and the later removal of five top officers, strove mightily last week to put its best face on a turnaround.

Acting-CEO Dwight Burgess stressed that the city's largest CU has avoided financial trouble in 2009 with a $450,000 first-half profit following multimillion-dollar investment losses in 2008.

At the same time, the MATCU Board has cleared the way for a top-to-bottom management restructure in search of a new business model. The chief financial officer and four other top positions were eliminated in the sweeping shakeup tied to undisclosed investment missteps.

Among those departing were President/CEO Carlos Webb in April and Chief Financial officer Fred Rauch, who left in June.

One of the dismissed executives, Judy Bell, the former senior vice president of administration, has filed a whistleblower lawsuit in a Memphis federal district court contending that she was let go after alerting regulators about alleged “fraud, waste and law violations.” According to court filings, she was in line to become interim CEO and accused MATCU of unfairly punishing her. Bell alleged she was “harassed and assaulted” after she complained to state and federal regulators about the alleged violations. MATCU officials were not immediately for comment on the Bell suit.

Meanwhile, the exact nature of the bond write-downs has not been revealed. MATCU reported an $11 million loss for 2008, but the chairman of MATCU, James Hayslip, told Memphis Commercial Appeal earlier this month that bonds the CU had purchased two or three years ago “backfired on us,” and “if we had gotten rid of them in January 2008, we would have lost $2 million” instead of $11 million.

MATCU officials have also declined to go into much detail on the securities problems except to stress that the 2008 investment losses “were on paper and that while the market value decreased the securities were highly rated.”

Industry sources pointed out that regulators obviously felt the CU had the capacity to recover from the losses “or otherwise they would have removed the entire board and that didn't happen.”

Both the NCUA and the Tennessee Department of Financial Institutions declined comment on MATCU's problems.

“This is a confidentiality matter, and we can speak only generically on the state of the industry in Tennessee,” which is doing “satisfactorily but experiencing the same economic difficulties as the rest of the country,” said Greg Gonzalez, state commissioner.

Citing privacy laws, the CU has also deferred in naming any of the fired officers except to say they represented lending, community affairs, the CUSO, and liabilities, and all departed “during the week of June 22.”

Burgess, 66, the vice president of operations who was named the interim CEO, said a complete reorganization of the CU is now underway, and “it may take several months” until the reorganization is complete. The CU has 250 employees, 15 branches and 54,000 members.

Burgess stressed that the CU “is not in trouble and is very solvent,” but management structure needs to be streamlined.

In the Commercial Appeal article, Hayslip was quoted as noting that regulatory agencies are the CU's “bosses” and have the authority to replace the board if they see fit. “If they feel we need to make some changes and re-establish our format and we don't do it, then we're the village idiot,” said Hayslip. He added that operational changes have been made, including cutting travel and marketing.

Hayslip also denied Bell's claims of harassment in a separate Commercial Appeal article.

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