Judge Rules NCUA Does Not Owe Fired CEO Severance Pay

A federal judge in Michigan ruled Monday that the NCUA does not owe more than $300,000 to James Perna, a 42-year credit union president/CEO who was fired when Detroit’s Health One Credit Union was conserved and liquidated in May 2014.

Perna sued the independent federal agency over an earlier arbitration ruling over severance pay.

“Though state and federal law provides courts the authority to enforce arbitration agreements, the Federal Credit Union Act (“FCUA”), which governs this suit, severely limits that authority,” U.S. District Court Judge Arthur J. Tarnow in Detroit, wrote in his ruling. “Because the FCUA trumps conflicting provisions of state and federal arbitration law, Defendants (NCUA) will be granted summary judgement.”

In October 2014, Perna filed a claim for unpaid wages and fringe benefits with the Michigan Occupational Safety and Health Administration Wage and Hour Program, which determined Perna’s dispute should be resolved by the American Arbitration Association.

Although the AAA awarded Perna a lump sum severance of $315,645 last October, the arbitrator also said that the NCUA was not a substituted party to Perna’s employment contract and was not responsible for paying severance.

Perna filed a lawsuit last year claiming the arbitrator exceeded his powers and erroneously determined the NCUA  had no liability for the damages awarded to the former CEO.

In May, the NCUA filed for summary judgement, which Judge Tarnow granted Monday in favor of the independent agency. He also denied a summary judgement motion filed by Perna’s attorney.

The NCUA successfully argued, in part, that the arbitration award was unenforceable because there was no valid arbitration agreement between Health One CU and Perna. The federal agency also argued that the NCUA acted within its authority by repudiating his employment contract and firing Perna when state regulators conserved the credit union for unsafe and unsound practices and named the NCUA as conservator.

Throughout Perna’s four-decade tenure, the $14.5 million Health One CU did not appear to have financial difficulties until 2013 when the cooperative posted a net income loss of more than $1.3 million at the end of that year compared to a net income gain of more than $139,000 at the end of 2012, according to NCUA financial performance reports.

In 2014, the credit union continued to lose money and recorded a net income loss of $651,309 at the end of the third quarter.

Health One’s 3,664 members, assets, shares and selected loans were assumed by the $1.3 billion New England Federal Credit Union in Williston, Vt. in December 2014.