CEO of Conserved Texas CU Made Cash Gifts to Board Members, NCUA Says

New court documents revealed that Jeffrey B. Moats, the former president/CEO of the conserved Edinburg Teachers Credit Union, allegedly made regular cash gifts to board members and made at least one personal loan to the former board secretary, Brian J. Warren, who did not respond to an investigative subpoena, according to the NCUA.

The independent federal agency on Friday filed a petition in U.S. District Court in McAllen, Texas asking a federal judge to issue a court order to compel Warren to submit documents, including emails, text messages, payments and other records, regarding any business dealings and financial arrangements, including loans and cash gifts that allegedly involved Warren, Moats and Board Chair Richard K. Kanipe, Vice Board Chair Joe L. Cantu Jr., Board Member Dale M. Ramos, and Supervisory Committee Members Donald G. Strong and Daniel Roma. A local real estate broker Ted Miller also was listed; when reached by CU Times on Monday, he declined to comment.

According to the NCUA, Warren did not comply with the investigative subpoena demanding that he submit these documents.

Warren joined the board in August 2014 and served until the credit union was conserved on March 26. About two weeks before the conservatorship was announced, the NCUA’s general counsel’s office issued a formal, confidential order of investigation to commence an investigation into the conduct and affairs of ETCU.

“In connection with a formal investigation into ETCU’s past operations, the NCUA served Warren personally with an investigative subpoena on April 22, 2021,” the NCUA wrote in its June 11 petition for the court order. “The subpoena contained 17 categories of document requests and required compliance by May 6, 2021. Warren did not respond to the subpoena within this timeframe, nor did he serve formal objections or ask for additional time.”

When reached Monday by CU Times, Warren said he thought he did comply with the subpoena.

“I sent in personal notes I had taken at board meetings,” he wrote in an email. “It was the policy of the board to shred any documents with member information at the conclusion of the meetings, so I had none of those.”

The NCUA said in its court document that when its enforcement lawyer, Bruce R. Hegyi, contacted Warren, he “flatly stated that he had no responsive documents.”

After additional prodding, however, Warren responded to Hegyi by letter on May 11, 2021.

“He provided 11 pages containing a smattering of typed notes from board meetings and stated that, other than the notes, ‘I have no other documents pertaining to ETCU,’” the NCUA said in court documents.

In his email to CU Times, Warren said he has been looking for his past emails with Moats and found several of those emails, which “I will gladly send in.”

“I was in the habit of deleting all old text messages that I have, but I have taken the step to talk to my cell phone carrier representatives to see if I can obtain hard copies of the texts,” Warren said. “Otherwise, I simply don’t have any other documents. My work as a board member of ETCU was entirely voluntary and the board’s sole interest, always, was service to ETCU’s members.”

He added, “I am totally and completely willing without any reservation whatsoever to comply with anything the NCUA deems necessary for me to provide. I can provide my own written account of my years as a member of the board at ETCU, certainly. ETCU was in excellent financial shape when the conservatorship happened, and I am still completely baffled by the whole thing.”

In its court documents, the NCUA specified that Warren had a personal financial relationship with Moats in which the former CEO made at least one personal loan to Warren, and that the former board member was making monthly payments on that loan over several years. According to the independent federal agency, Moats made regular cash gifts and/or other gifts to the various board members, and the former CEO and board members frequently engaged in text communications and/or emails before the credit union was conserved.

The monetary value of those cash gifts and other gifts were not specified in court documents.

The NCUA did not say whether it issued subpoenas for the other board members, the supervisory committee members or Miller.

“I did receive a loan from Mr. Moats for $10,000 at an interest rate of 11.9%, which I paid back. That loan would be part of the records of ETCU,” Warren said in his email. “I, personally, did not keep any documentation of that loan, but it certainly is no secret.”

Warren also said that at the annual Christmas meeting, all board members received a gift from the credit union, but not from Moats.

“It was my understanding that these gifts were just thank-yous, given that we were all volunteers,” Warren said. “Again, there was not any documentation of these things, so I felt I had nothing to submit regarding them.”

Warren did not specify what those gifts were.

In CU Times’ April interview with former ETCU Board Chair Kanipe, he expressed shock when he received a call from regulators that the credit union was conserved, though he dismissed the notion as to whether the former CEO’s extraordinary high compensation had anything to do with it.

Although the Texas Credit Union Department said ETCU’s conservatorship was necessary to protect the public interest, the regulator cited no specific reason – not even the typical “unsafe or unsound practices” reason – for taking over the credit union. The Texas regulator appointed the NCUA as the conservator.

While the financial performance reports of the $111 million ETCU showed the credit union was not struggling financially or losing money, the credit union’s 2019 IRS 990 return revealed that former CEO Moats was paid a total compensation of $1,611,821, which was four times the median base salary and bonus pay for CEOs across all asset sizes in 2019, according to a CUES Executive Compensation Survey,

What’s more, a CU Times review of ETCU’s 990 returns from 2008 to 2019 showed that Moats received $8,799,709 in total compensation. Over those 11 years, that averaged out to nearly $800,000 annually.

Among ETCU’s peer credit unions that managed assets of $100 million to $199 million, the total CEO compensation amounted to $196,178, the CUES survey showed.