Texans CU Is Facing A Lawsuit Filed By Its Former Executives

RICHARDSON, Texas - A lawsuit filed against Texans Credit Union by three former executives of its CUSO claiming wrongful termination and seeking damages alleges that the credit union also investigated converting to a bank charter in mid-2006.

The lawsuit comes as another Texas-based credit union, the $113-million First Basin CU in Odessa, awaits approval from the Office of Thrift Supervision to convert to a federal mutual bank charter. First Basin had filed papers with NCUA earlier this year indicating that it was exploring such a charter conversion. OTS will decide on the First Basin application by Nov. 22.

In the Texans case, the three former executives at Texans Commercial Capital, a business lending subsidiary of the almost $2-billion Texans, are alleging defamation, fraud and breach of contract as the result of their termination. In their suit, former CEO John C. O'Shea, former SVP/CFO Paul J. Valdez, and former EVP/COO Joel B. Fox said they were let go following discussions of how to resolve the fact the CU was bumping up against the 12.25% cap on member business loans. In their suit the three former executives said that among the options explored were selling the CUSO to other entities, including a potential sale to Dallas-based NexBank. The plaintiffs further allege that during that same year the CU also met with representatives of New York-based Sandler O'Neil about a potential conversion to bank charter. Had Texans sought to convert it would have been the third billion-dollar-plus CU in the state to do so.

The three former executives are seeking actual damages in excess of more than $180,000 as well as unspecified compensatory damages, punitive damages, interest, and fees related to the suit. Texans CU has declined comment citing the pending litigation, but said in its own court filing that there has been no defamation and the plaintiffs have been paid all funds owed.

The case is scheduled for trial on Oct. 9.