Former Board Member Drops Lawsuit Against MCU & NCUA

A former board member of the $3.8 billion Municipal Credit Union has voluntarily dismissed his lawsuit that sued the New York-based financial cooperative and the NCUA.

A federal judge for the Southern District of New York is expected to approve the voluntarily dismissal with prejudice in May, according to court documents. In an April 19 letter to U.S. District Court Judge Katherine Polk Failla, former MCU board member Mark Brantley wrote he is voluntarily dismissing his lawsuit “due to the toll the case has taken on my family and me.”

Brantley filed the lawsuit in November 2019, which made several allegations that his constitutional rights were violated after state regulators dismissed him and the entire MCU board when the credit union’s president/CEO, Kam Wong, was arrested in May 2018 on fraud, embezzlement and aggravated identity theft charges. He was sentenced in June 2019 to five and a half years in prison after pleading guilty to embezzling nearly $10 million from New York City’s oldest credit union.

Brantley’s lawsuit also claimed defamation and professional malpractice allegations against the NCUA, the New York Department of Financial Services and Eisner Amper LLP, one of the nation’s largest accounting firms that was responsible for MCU’s auditing and financial reporting.

In March, Judge Polk Failla terminated the lawsuit’s claims against Maria T. Vullo, who was the former superintendent for New York’s Department of Financial Services, and current NYDFS Superintendent Linda A Lacewell and Eisner Amper. They asked that Brantley’s lawsuit against them be dismissed, which the judge granted last month.

In his lawsuit, Brantley claimed he was defamed when the regulator issued a press release after MCU was conserved in May 2019 that New York DFS had uncovered deficiencies in board oversight two years earlier, which facilitated the multi-million-dollar embezzlement by Wong.

However, in Judge Polk Failla’s ruling that granted the dismissal, she wrote that Brantley failed to state a claim for defamation for a myriad of reasons, including that there was no specific mention of Brantley in the DFS press release.

Judge Polk Failla also ruled in her dismissal order that Brantley failed to state a claim against Eisner Amper for alleged professional malpractice, negligence or gross negligence. A failure to state a claim means even if the factual allegations in a civil complaint are true, they are insufficient to pursue a cause of action for a legal remedy.

Although Vullo, Lacewell and Eisner Amper were released from Brantley’s lawsuit, MCU and the NCUA were not. Brantley’s letter asked that his case be dismissed against them.

In a separate civil lawsuit filed last May by MCU and the NCUA against CUMIS Insurance Society, U.S. District Court Judge William M. Conley for the Western District of Wisconsin in Madison ordered that the lawsuit be transferred to federal court at the Southern District of New York in Manhattan.

The conserved credit union and the NCUA sued the Madison, Wis.-based CUMIS because it has refused to pay a $9.8 million interim insurance claim to cover some of the losses caused by Wong. The lawsuit revealed for the first time details and allegations of widespread fraud and corruption that not only involved Wong, but allegedly others including at least five top executives, two supervisory committee members and 13 former board members; the scheme led to more than $18 million in financial losses and $109 million in write-down losses, according to the lawsuit.

After MCU and the NCUA filed this lawsuit in a Wisconsin state court, CUMIS moved it to federal court in Madison and asked a judge to transfer the case to New York. MCU and the NCUA opposed the transfer and asked the judge to remand the case to state court.

In his ruling issued last month, Judge Conley wrote that most critically, the Southern District of New York and the state of New York have a significantly stronger relationship with this claim than Wisconsin federal court and the state of Wisconsin.