KEY WEST, Fla. — Troubled Keys FCU, taken under conservatorship by NCUA two weeks ago, has stepped up its battle with its former president, claiming the chief executive of the $200-million credit union "scrubbed" or erased thousands of computer files just before his November 2007 firing.
The allegations are part of a wrongful termination suit filed by John Dolan-Heitlinger, who is seeking more than $700,000 in deferred compensation and back pay from the credit union he headed for 16 years. The suit was originally filed in state court but moved this week to federal court after the conservatorship.
Sources familiar with the case say the potential expense of the ex-CEO's claims did not force the NCUA takeover. Keys FCU, the largest CU in the Florida Keys, reported losses of $1.8-million for 2008 and of $2.4 million for the first half of 2009.
The credit union is alleging that just prior to his firing, Dolan-Heitlinger destroyed important information related to charges against him by using file "scrubbing" software. The majority of the files were created in the three months before the firing when the then-CEO "knew he was under investigation" by the Keys FCU board, the suit claims. Among the files allegedly scrubbed were those of the former director of human resources, who had been fired over a sexual misconduct claim.
The suit alleges that Dolan-Heitlinger bought the scrubbing software, CyberScrub, used to overwrite files, and Registry Detective, used to search, edit and delete software, with his Keys FCU credit card. The software was allegedly discovered by a forensic expert hired after Dolan-Heitlinger's firing on two computers used by the then-CEO and one used by the former HR director, the lawsuit alleges. In the suit, Keys FCU also claims that a credit union insider allied with Dolan-Heitlinger passed him a digital media card with confidential credit union documents after the firing and it is asking the court to order its return.
In support of his wrongful termination claim, Dolan-Heitlinger notes he was not invited to attend two October 2007 board meetings where his firing was discussed, and he was never allowed to present a defense of his actions.
The board asserts the firing was for "just cause" for a variety of actions, including: leasing the CU's property for residential arrangements in violation of NCUA regulations; concealing the creation of a non-profit CU foundation from the board; approving illegal compensation arrangements without telling the board; concealing a consultant's report saying the compensation arrangements were excessive; mishandling a sexual claim against KFCU's director of HR, and mishandling multi-million dollar construction contracts with the credit union, among other things.
A lawyer for the credit union was confident of their case. "We feel very strongly that this lawsuit is without merit and that we will prevail in this litigation because Mr. Dolan-Heitlinger was terminated for cause," said Alan Rosenthal, a Miami lawyer representing the credit union. Attorneys for Dolan-Heitlinger could not be reached.
