DALLAS The former CEO of Texans CU rebutted NCUA allegations that his negligence caused the failure of the one-time $2 billion credit union, being run under NCUA conservatorship the past two years.
David Addison, who was fired in April 2009, told a federal court here his actions leading to the purchase of several CUSOs, including a troubled broker-dealer called Online Brokerage Services, were the proper exercise of business judgment and were undertaken with proper approvals by the credit union’s board and NCUA, and that any losses resulting from the brokerage deal were caused by the national economic crisis.
In a rare civil case, NCUA sued Addison in December claiming the former CEO, who led the one-time Texas Instruments credit union from 2003, breached his fiduciary duty to members and was “grossly negligent” in his management of the credit union, which is now $20 million under water and only remains operational because of a $60 million emergency loan provided by NCUA.
The suit is unusual because NCUA rarely brings civil claims against executives of failed credit unions where no criminal activity has been alleged.
In its suit, NCUA claims the broker-dealer acquisition, which eventually caused Texans a $16 million loss was one of the prime reasons for the demise of the credit union giant, which lost $225 million between 2007 and 2011, erasing $180 million in capital.
The Online Brokerage acquisition was one of several ill-fated CUSO deals undertaken by Texans under Addison, including Texans Insurance Group, Innovative Support Solutions and Texans Commercial Capital LLC, a member business lending CUSO now known as CU Liquidity Services LLC, which has accrued tens of millions of dollars in losses on troubled real estate developments around the country.
During a status conference on the NCUA suit, Addison rebutted NCUA’s assertions of his negligence as the cause of the Texans failure. “Any alleged damages resulting from the OBS acquisition are a product of national economic circumstances, a downturn in TCU’s commercial lending business, and the NCUA’s decision to sell OBS at the time and for the price it did so,” said Addison’s lawyers. “Addison’s actions were neither improper nor unlawful, known by the NCUA, and, at minimum, were not the cause of the NCUA placing TCU under conservatorship.”
NCUA, after it took over Texans, began to divest the credit union giant of Online Brokerage, selling the $15 million purchase it for just $6 million. Together with a $7 million cash infusion, the CUSO cost Texans about $16 million in losses. “These losses,” said NCUA in its suit, “contributed to TCU’s near insolvency and the necessity for the conservatorship.”
“Addison’s knowing misrepresentations, concealments and manipulation of information disclosed to the TCU Board cause TCU to purchase a materially overvalued company in violation of Texas law,” charged NCUA in its suit.
