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A former CEO and a North Carolina credit union agreed to settle a lawsuit in which the executive claimed wrongful termination, discrimination, and retaliation after reporting to the NCUA the board's alleged violations of the credit union's bylaws and regulations.

Betty Eileen Donovan, 64, who worked at the $66 million Bragg Mutual Federal Credit Union for more than 30 years, was appointed its president/CEO in November 2015 and was fired in February 2018. Two months later, she filed a lawsuit against the Fayetteville, N.C.-based credit union in federal court.

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The lawsuit, which was settled earlier this month, singled out John Szoka, the Bragg Mutual FCU's board chair and a Republican state representative of North Carolina's 45th district, who allegedly engineered Donovan's termination.

Donovan alleged the elected lawmaker cursed, yelled and belittled her at board meetings and claimed he was responsible for the credit union's financial turnaround during the annual membership meeting last March.

The former CEO's lawsuit claimed Szoka and the board violated the FCUA whistleblower law, interfered with her contract, wrongfully terminated her based on sex and age discrimination and that the board conspired against her.

The credit union denied Donovan's claims and allegations, arguing in part that Donovan failed to establish that she was discharged from her position, and that she presented no facts or details to support her allegations.

"The parties to this litigation have agreed upon terms of settlement within the context of mediation which they agreed to keep confidential and which serve to fully resolve all pending claims between the parties," Connie Elder Carrigan, the attorney representing Bragg Mutual FCU, said. "Ms. Donovan's counsel has filed stipulations of dismissal of all claims against the defendants (Bragg Mutual FCU) with prejudice.  On behalf of my clients, I am only at liberty to state that my client representatives and I are relieved that this matter has been resolved."

Lawyers representing Donovan did not respond to CU Times messages seeking comment.

Before the settlement was reached, however, Bragg Mutual FCU asked a federal judge to dismiss Donovan's case.

In a January ruling, U.S. District Court Judge Louise W. Flanagan dismissed Donovan's age discrimination and conspiracy claims, but she did not dismiss the former executive's alleged claims regarding FCUA whistleblower violations, "tortious interference" with former CEO's contract, sex discrimination and retaliation and punitive damages.

The FCUA's whistleblower provision forbids anyone at a credit union to fire, discriminate or retaliate against any credit union employee who reports violations of laws or regulations.

"Given the sequence of events in this case, the timing of (Donovan's) termination in relation to her reports to the NCUA suggest (Donovan) was fired in retaliation for reporting the acts of (the credit union board)," Judge Flanagan wrote in her ruling. She also noted that if Szoka induced the Bragg Mutual FCU board to fire Donovan for alleging violations of law under FCUA, such inducement would be conduct exceeding what he is lawfully allowed to do as a director a federal credit union.

Donovan alleged the board did not comply with a number of other duties and instructions mandated in the Credit Union Board of Director Handbook, bylaws of the credit union and the FCUA, including failing to maintain appropriate corporate records.

Judge Flanagan also ruled that Donovan met the prima facie case, or presented sufficient evidence, to support her sexual discrimination claim.

In the ruling, the judge pointed out the board took away Donovan's supervisory authority, that Szoka yelled in her face, and that the discrepancy of pay between Donovan and another senior male executive's pay were "sufficient allegations of sexual discrimination against" Bragg Mutual FCU.

But Judge Flanagan dismissed Donovan's age discrimination claim even though Szoka allegedly made age-related comments such as describing the former executive as "antiquated" and did not bring "fresh ideas." "The court concludes that such statements are insufficient to give rise to a reasonable inference that (the board) terminated her on the basis of age," Judge Flanagan wrote.

The judge also dismissed Donovan's conspiracy claim, which was based on the allegation that Szoka took credit for the former CEO's accomplishments at Bragg Mutual's annual meeting to gain political favor with his constituents.

Even taking this allegation as true, Judge Flanagan noted, Szoka taking credit for Donovan's accomplishments was not a wrongful act and that the former CEO did not suffer damages because she was not mentioned during the annual meeting.

During her tenure as CEO, Donovan took Bragg Mutual FCU from years of net income losses to net income gains of more than $500,000 in 2016 and $956,212 in 2017, according to NCUA financial performance reports.

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Peter Strozniak

Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.