Former CEO of Conserved Texas Credit Union Files $1 Million Lawsuit

Jeffrey Moats has sued Edinburg Teachers Credit Union, which he led as president/CEO for more than 25 years, claiming his employment contract was breached without notice or cause after the Texas credit union was conserved by state regulators in March.

Moats is seeking more than $1 million in monetary relief.

Although Moats’ claims are against ETCU, the NCUA, as the conservator, also was named as a defendant in the lawsuit.

On Monday, the U.S. Attorney’s Office in Austin on behalf of the NCUA asked a federal court judge to dismiss Moats’ case, in part, because the U.S. government and its agencies are generally immune from lawsuits and lack subject matter jurisdiction, meaning the federal court has no authority to hear the case. Moats’ lawsuit was originally filed in a Texas state court in Travis County, but the NCUA moved it to U.S. District Court in Austin and filed its motion to dismiss on Monday.

The former executive argued in court documents that because his employment agreement was repudiated following the conservatorship, it deprived him of deferred compensation and benefits that were due to him under the terms of his contract.

“In its letter expressly repudiating Mr. Moats’ contract, the credit union recited the statutory authority of the conservator to repudiate contracts generally, but identified no defects in Mr. Moats’ performance, and provided no notice or opportunity for Mr. Moats to cure any alleged deficiency of performance,” the lawsuit claimed. “This refusal and failure of the credit union to notify Mr. Moats of the basis for repudiation of his contract further breached Mr. Moats’ employment contract causing damages for which he now sues.”

Since Moats was fired, ETCU has refused repeated requests to return his personal property, including works of art in his former office. The credit union also has refused to provide Moats with a copy of his employment contract, according to the lawsuit.

The NCUA is investigating Moats, the former board of directors, supervisory committee members and others.

Its investigation was stonewalled when former ETCU Board Member Brian J. Warren allegedly failed to comply with an NCUA investigatory subpoena to submit documents including emails, text messages, payments and other records regarding any business dealings and financial arrangements, loans and cash gifts that allegedly involved Warren, Moats, board members, supervisory committee members and a Texas real estate agent.

Last week, the federal agency filed a petition in a McAllen, Texas federal court asking a judge to issue an order to compel Warren to comply with the subpoena. The NCUA has not filed any additional federal court petitions against other board members or supervisory committee members who may have also received subpoenas.

Though Warren told CU Times he has no such documents that the NCUA is seeking from him, he said he is working to compile past emails and text messages for the NCUA.

Moats’ lawyer, John MacVane in Houston, declined to comment on whether his client received an NCUA subpoena.

“I can’t comment on whether we received a subpoena, but what I can tell you is that we’ve complied with every request for information we’ve gotten from the NCUA,” MacVane said. “We’ve made a bunch of requests for information to the NCUA, and they’ve not given us anything. So, I really don’t have a lot of visibility into their side of what’s happening.”

Although the Texas Credit Union Department said ETCU’s conservatorship was necessary to protect the public’s 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.

MacVane also declined to comment on Moats’ compensation.

Nevertheless, Moat’s lawsuit indicated he saved a financially troubled credit union. Shortly after taking over the helm, according to his lawsuit, Moats transformed ETCU into a model of financial stability and efficiency, nearly quadrupling its assets from $27 million to $106 million, and substantially increasing the credit union’s capital from $2.8 million to more than $23 million with a capitalization ratio exceeding 22% for 15 consecutive years. These financial improvements enabled ETCU to reduce member fees and deliver excellent member service.

Moats pointed out in his lawsuit that every annual employment contract was unanimously approved by the board and despite his “unmitigated success,” ETCU was conserved.

However, the U.S. Attorney’s motion to dismiss Moat’s lawsuit noted that when an insured credit union is in “danger of failing,” the NCUA has the authority to accept appointment as conservator to preserve the credit union’s assets and protect the share insurance fund.