Management Shakeup, Lawsuits, CUSO Bankruptcy Plagued Texans CU

As 2008 came to an end, legal and operational woes continued to spill over into 2009 for the beleaguered Texans Credit Union.Around this time in 2008, the $1.7 billion CU said it would scale back new construction and development loans and focus on members with strong operating records within their businesses. While commercial loans would continue to be managed, Texans sought to minimize risks to that piece of the portfolio.Texans was not as detailed about its goals for 2010. Spokeswoman Jo Trizila kept the CU’s new year strategies vague, saying the cooperative would “continue our process of controlling expenses and creating efficiencies in our operations” and “continue to provide excellent service to our members.”On the lending front, Texans said it would also continue to meet the consumer lending needs of its members by primarily focusing on traditional CU loan products such as auto loans, small business loans, residential mortgages and home equity loans. Its 2009 goal of mitigating commercial loan risks was set to continue in 2010, Trizila said.As of Sept. 30, the Richardson, Texas-based credit union had $426 million in business loans, according to NCUA data. Total member business loans charged off were $6.1 million, nearly double the amount in June. Real estate loans reported as business loans were $389 million, down from $405 million in June. Outstanding commercial construction and development loan participations totaled $55 million, a significant drop from $82 million in June.Meanwhile, Texans’ 2008 losses proved to be too much for its President/CEO David Addison, who resigned Jan. 31 after six years of service. That was the sentiment expressed by Mike Sauer, who took over as interim and was later appointed the permanent CEO in April. Sauer served as the executive vice president and chief operating officer for a commercial products company and earlier as a vice president for a global manufacturing company. A member of Texans’ board since 1992, Sauer served as chairman from 2002 to 2006 and had held other board positions such as vice chairman, treasurer and secretary.Lawsuits continued to weigh down Texans this year. In May, the CU’s CUSO Credit Union Liquidity Services LLC, which was previously known as Texans Commercial Capital LLC, filed a suit against $2.1 billion Coastal Federal Credit Union for breach of contract involving loan participation agreements tied to commercial properties in Pennsylvania and Illinois. Parties for both sides did not want to comment or provide an update on the suit.A lawsuit going back to 2007 that involved the former president of Texans CUSO Insurance Group LLC continued to play out this year. Kevin M. Curley, who sold his insurance company to Texans Credit Union, was terminated in April 2007. Curley filed suit for breach of contract. In July 2008, Arbitrator Susan Soussan ruled that Curley was fired without reasonable or justifiable cause and ordered Texans Insurance to pay him $350,000 in back pay, benefits and pre- and post-judgment interest. Curley was also supposed to be reinstated but never resumed his post at the insurance CUSO. In July, Curley told Credit Union Times that an arbitrator had decided on a $6.3 million judgment in his favor. Despite repeated attempts to follow up, Curley did not respond to calls. Texans has previously said it does not comment on pending litigation.In September, Texans CUSO Insurance Group filed for Chapter 11 bankruptcy protection due to the economic recession, the loss of business from construction industry clients, an unstable insurance market and expenses to fight legal battles were among the reasons, the CU said. A bankruptcy court granted several forms of relief including approval to pay prepetition commissions owed to its independent agents, approval to remit all insurance premiums to insurance carriers, approval to honor prepetition wages and benefits of its employee and interim approval to utilize cash collateral, according to the CUSO. In October, the CU also received its request for a final cash collateral.The troubled CUSO experienced even more shakeups in November when its president, Mike Haselden, resigned along with Lindsay Contreras, vice president and program manager of NCIS, a division of the insurance subsidiary. Jess Ellis was named as Texans CUSO Insurance’s new president.–[email protected]