Whistleblower Suit Airs CU's Dirty Laundry
South Florida Federal Credit Union and Maggie Martinez, president/CEO of the $35 million Miami co-operative, are being sued in federal court by two former employees who allege they were fired for cooperating with a NCUA investigation.
The lawsuit, filed Sept. 5 by Christine Redmond, who was South Florida’s director of marketing, and Tanishal Harris-Darden, former operations manager, includes allegations of sexual misconduct, nepotism and NCUA violations.
A trial is set for this fall. The plaintiffs contend they were fired to try to prevent them from telling federal regulators that Martinez had a relationship with a member and made numerous risky loans with preferential terms and conditions to him, and to her other friends and family members, according to court documents.
In an amended complaint filed Jan. 27 in U.S District Court in Miami, the plaintiffs also claim they were fired, at least in part, for providing information to the NCUA “regarding multiple violations of laws committed by the credit union” and because they “refused to participate in certain illegal conduct committed by the credit union.”
The lawsuit alleges that Martinez hired four relatives to work at the credit union on “unjustified financial terms,” despite their lack of qualifications, including two nephews who allegedly took money from members by not properly posting payments and deposits, the complaint said.
The credit union did not report either nephew’s theft, which is a direct violation of NCUA regulations, the complaint said.
In addition, Martinez proposed lowering interest rates on 20 mortgages that benefitted family members and loaned $40,000 to a family member in financial peril, which resulted in $35,000 in charge offs due to default, the complaint said.
Read more: Suit claims credit union improperly compensated board members …
The lawsuit also contends that South Florida FCU violated numerous NCUA regulations, including those that prohibit compensating board members.
“Board members were given gift cards with an average value of $500-$750, iPads (which were not used for credit union business) and received preferential treatment for family members such as employment at the credit union and no-bid vendor contracts,” the complaint states.
Also, according to the lawsuit, Martinez allegedly required all employees to provide passwords and user names to access all systems and databases via email to an email address that Martinez accessed at the credit union and home without the required encryption mandated by the NCUA.
Messages left at South Florida FCU were not returned by press time.
Jonathan Vine, a Florida attorney representing the credit union and Martinez in the
federal lawsuit, declined to comment on the pending litigation.
In court documents filed in response, the credit union denies all allegations and said the termination of the two employees was not related to the NCUA investigation.
“Defendants affirmatively assert that all actions taken by defendants with regard to plaintiff’s employment were predicated upon legitimate and non-retaliatory business considerations and lawful and justifiable grounds,” according to court documents.
Also, the credit union and Martinez assert that Redmond was terminated “prior to the alleged relevant investigation by the NCUA” and that Redmond “did not complain and/or provide information to the board, the attorney general and/or administration, regarding any possible violation of any law or regulation...prior to her lawful termination,” the court document said.
A jury trial is set for Oct. 20, 2014 in U.S. District Court in Miami.
Read More: Suit spoils charter conversion …
Following the NCUA investigation, South Florida FCU filed an application Oct. 2 to convert to a state charter, according to the Florida Office of Financial Regulation’s Division of Financial Institutions.
But the state received a written request from Martinez to withdraw the application in late December, state officials said.
Credit unions do not have to provide a reason for withdrawing a request, and other applications have been withdrawn in the past, said Florida OFR spokeswoman Tiffany Vause.
In its application to convert to state charter, South Florida FCU stated that its board of directors had approved the proposed conversion and believed it to be in the best interest of the members because “the state of Florida has a better understanding of local conditions and can better supervise the credit union,” according to documents filed with the state.
Experts say South Florida FCU was wise to withdraw its application since it has pending legal issues.
“A new regulator isn’t going to take you if you have issues,” said Richard S. Garabedian, a Washington attorney who specializes in credit union charter conversions. “A credit union can’t flee one regulator by going to another.”
When asked for comment on the case, Public Affairs Specialist John Fairbanks said, "I cannot comment on any area that involves supervision or enforcement."