Judge Merkl agreed with the NCUA in her "Report and Recommendation" that was released in January. For the report to become finalized, however, it must be reviewed and approved by U.S. District Court for the Eastern District of New York Judge Nina R. Morrison in Brooklyn. As of Wednesday afternoon, Judge Morrison has not issued her decision.

In February 2023, the federal agency, as the liquidating agent of MCU, initiated the civil lawsuit in U.S. District Court for the Eastern District of New York against Kaufman and Mitchell Reiver, who served as MCU’s general counsel and chief compliance officer and was initially named as a co-defendant in the lawsuit alongside Kaufman. The $1.1 billion MCU, founded by Kaufman's family, was liquidated in September 2018 after posting more than $745 million in taxi medallion loan losses. 

Although the NCUA's claims against Reiver were dismissed in January 2024, the federal agency continued its legal claims against Kaufman.

By February, the NCUA sought summary judgement, meaning the federal agency asked Judge Morrison to decide the case without a full trial because there were no real disputes of the key facts in the lawsuit.

Those key facts included Kaufman’s criminal conviction for accepting illegal gratuities starting in 2010 from Tony Georgiton, owner of a taxi medallion brokerage company and other businesses, and from CBS Radio.

After Georgiton bought a Jericho, N.Y., home where Kaufman lived rent free for more than two years, the former credit union executive personally approved tens of millions of dollars in Melrose loans, including 50-year amortization loans that were particularly favorable to Georgiton's companies, to Melrose’s detriment. Kaufman purchased the home with an unsecured loan from Georgiton and a $240,000 loan from Melrose co-signed by Georgiton, but Kaufman never made payments on the latter loan.

Kaufman also inked a questionable $2 million naming rights deal for a local entertainment venue that was owned by one of Georgiton’s businesses. The NCUA claimed the naming rights agreement had little to little to no value for MCU.

Kaufman also accepted luxury vacations from CBS Radio, which offered an “incentive vacation plan” that offered clients fully paid vacations for increasing their companies’ spending on advertising with the radio network. Although MCU regularly advertised on CBS Radio, its advertising budget significantly increased during the period Kaufman received vacations from 2010 to 2015. In 2012 alone, MCU spent $620,000 with CBS Radio. During Kaufman’s trial, federal prosecutors argued these trips were not standard business expenses, but rather an illegal gratuity tied to advertising spending. Additionally, under MCU’s bank bribery policy, employees were prohibited from accepting gifts of more than $100 from vendors without the board’s approval, which Kaufman never received.

It should be noted that CBS Radio was not sued by the NCUA and was not named as a defendant in the civil lawsuit. Moreover, no allegations were made against CBS Radio and the Kaufman case did not suggest CBS Radio was investigated or penalized for offering these incentive trips.

In its lawsuit, the NCUA also argued Kaufman should forfeit the full value of his spilt dollar insurance plan worth $2,568,127 that was part of his total compensation package.

In response to the civil lawsuit, Kaufman denied that his actions constituted a breach, arguing that he acted with the acquiescence and approval of several MCU board members. He also claimed the Georgiton loans were consistent with MCU policies and profitable for the credit union, and the vacations from CBS Radio were legitimate business trips rather than improper gifts.

Because there were no quantifiable damages, the breach of fiduciary duty claims should fail, Kaufman stated.

The former CEO also stated the faithless servant doctrine should not apply because his misconduct did not “permeate” his entire tenure at MCU, and that forfeiture of his full salary was excessive since not all his work was disloyal.

Kaufman was named CEO in 1998 and fired by the board in July 2016.

However, Magistrate Judge Merkl rejected nearly all of Kaufman’s arguments and recommended in her report that the NCUA be granted a summary judgment for Kaufman’s breach of fiduciary duty.

Kaufman’s lawyers did not respond to a CU Times request for comment.

READ MORE: The Report and Recommendation – NCUA v Kaufman

Contact Peter Strozniak at [email protected]