HARRISBURG, Penn. – A state appellate court on Friday rejected an appeal by the former CEO of Boeing Helicopters CU, who said the State Department of Banking could not bar him from the credit union industry because he is no longer working for the credit union, which fired him two years ago.
The Commonwealth Court of Pennsylvania said in its ruling the Pennsylvania banking statute gives the state regulator authority to ban people working with credit unions and banks, and those whose actions may have affected those institutions—even after they have left the jobs. To rule otherwise would hamper the enforcement ability of regulators, said the court.
“There can be no question that the (Department) has jurisdiction to determine whether people should be prohibited from working in credit unions,” wrote the court in Friday’s opinion. If the regulator does not have authority over ex-credit union employees, then all a CEO has to do to avoid sanction is to resign right before the regulator’s action, said the court.
In this case, the Department of Banking had issued an order intending to bar John Galante, the CEO of Boeing Helicopters CU, on January 26, 2009, a week after he was terminated by the credit union. At the time, the $110 million Ridley, Penn., credit union was embroiled in a major fraud investigation that saw its chief lending officer jailed for accepting kickbacks for approving risky loans. Galante was not charged with any involvement in the $2.5 million fraud.
In challenging the regulator’s order, Galante’s lawyers argued the Department of Banking no longer has the authority to ban him because he is no longer CEO of the credit union.
Prohibition orders, like the one assessed Galante, are among a handful of civil administrative actions used by state regulators and NCUA to enforce credit union rules and typically ban an individual from working for credit unions for life. NCUA prohibition orders are particularly stiff as they bar an individual from working for any federally insured credit union or bank, with violators subject to big fines.
The orders are typically brought well after an executive has departed the credit union and the legal process has run its course. NCUA almost always prohibits credit union executives from working in the industry after they have been convicted of a criminal act, like fraud or embezzlement.
