Linda Reynolds, CEO of NAFCU Federal Credit Union of the Year for 2011, has been accused of fraud and misappropriation of funds.
Reynolds had been CEO at Pinellas Federal Credit Union since 1996. The 13,000-member, $84 million credit union, headquartered in Largo, Fla., won NAFCU's award as Credit Union of the Year for CUs under $150 million in assets last year, and Reynolds had been named CEO of the Year in 2009.
“Linda Reynolds has been a valuable asset to Pinellas Federal Credit Union, demonstrating exemplary leadership skills and ardent dedication that is an inspiration to her colleagues,” said Fred Petty, PFCU board chairman in a CU newsletter announcing the 2009 award. “This award is a testament to her outstanding services on behalf of our members.”
But in documents filed Jan. 5 in federal court, the CU alleged that Reynolds had misappropriated CU funds by hiring family members and friends as contractors and paying far higher than market rates. The CU also charged Reynolds with fraud, constructive fraud, breach of fiduciary duty and unjust enrichment. It also asked the court to permit it to freeze the accounts of Reynolds and relatives at the CU.
In her formal reply, Reynolds denied the charges and countersued the credit union board members, charging that the failure to release the funds is civil theft. She also claimed in her denial that the credit union leadership knew and approved of her choices for contractors.
“Plaintiff, acting through its operations director and/or IT technician, hired defendant's son to perform cabling work for it, knowing he was defendant's son and after approving a proposal he submitted to do the work at below market rates.” Reynolds wrote in the reply. “In addition, the chairman of plaintiff's board of directors, Jack Bowman, was aware of and never objected to the arrangement,” she added in the filing.
In its argument for a preliminary injunction permitting it to freeze Reynolds’ accounts, the CU argued it needed the injunction in order to protect the funds that, it argued, Reynolds had allegedly obtained unjustly.
“Because Reynolds is in possession of a substantial amount of funds belonging to the CU and its members and is, on information and belief, using and dissipating assets belonging to the credit union and its members, the credit union has no adequate remedy in law,” the CU argued.
In her countersuit, Reynolds noted that she had worked at the CU since 2006 and that under her leadership she and the CU had won the NAFCU awards. She claimed that the board had terminated her employment and demanded she leave the premises on Nov. 1 “without any warning and in violation of board policy.”
She said the CU also froze her accounts and accounts she held jointly with her grandchildren and charged it had done so unlawfully, charging the CU with civil theft under Florida law. She argued the CU had withheld her final paycheck and had blocked her access to military retirement benefits, and she denied the credit union had any evidence of wrongdoing to back up its actions.
In a Nov. 9 letter to the credit union board, charging it with civil theft, Reynolds said the board had frozen nine checking and savings accounts of hers and seven more owned jointly by she and her grandchildren. She also demanded the CU pay her treble damages, almost $149,000, for their actions.
Neither lawyers for the credit union or Reynolds returned calls for comment as of press time.