A federal judge last week ordered a former credit union CEO to file an amended complaint against the $3.2 billon Service Credit Union in Portsmouth, N.H. over a contract dispute regarding lifetime medical benefits.

Gordon Simmons left New Hampshire's largest credit union, SCU, in January 2016 after an internal investigation revealed he had a sexual relationship with his administrative assistant, forgave her $38,000 loan, fired an employee who exposed the affair and lied about all of it to the board of directors, according to court documents.

When Simmons resigned voluntarily, as he claims, he filed a lawsuit in a New Hampshire court alleging SCU breached a contract to pay lifetime medical benefits for him and his wife. SCU countersued Simmons arguing because the former top executive was forced to resign it nullified the credit union's contractual obligation to pay lifetime medical benefits. SCU also moved the lawsuit from state to federal court because Simmons' state law claims are preempted by the Employee Retirement Income Security Act passed by Congress in 1974.

U.S. District Court Judge Paul Barbadoro rejected Simmons legal motion to move his lawsuit back to a state court. The former CEO unsuccessfully argued his contract dispute with the credit union should be remanded to a state court because the federal court lacked subject matter over his state law claims.

The court also rejected Simmons argument that his contract is not an ERISA employee welfare benefit plan because it covered only him and no other credit union employees.

“In the present case, the only real issue is whether SCU's agreement to provide Simmons with post-retirement medical coverage established an ERISA plan,” Judge Barbadoro wrote in his ruling. “On this subject, the available evidence supports SCU's position that the agreement is a (ERISA) plan.”

What's more, failing to treat SCU's agreement as an ERISA employee benefit plan, the judged noted, would leave both SCU and Simmons exposed to the threat of conflicting and inconsistent state and local regulations, a problem that ERISA was expressly enacted to address.

The ruling also required Simmons to file his breach of contract complaint in federal court by April 16.

Over his 21-year tenure, Simmons grew SCU's assets from $292 million to nearly $2.8 billion.

According to SCU's 990 documents for 2015, Simmons' compensation package totaled $1.8 million. The credit union also paid for his home and company car.

SCU is suing Simmons for misrepresentation and breach of fiduciary duty.

When Simmons' sexual relationship with his administrative assistant began, he allegedly used the credit union's resources to support the extra-marital affair, including taking her on a business trip and charging the expenses to SCU, according to the credit union's lawsuit.

When another employee questioned the existence of the affair, the former CEO allegedly got approval from the board to fire the employee for lying to Simmons, engaging in a personal relationship with a staff members, and lack of trust. After the administrative assistant quit her job on November 20, 2015, he continued the affair with her and allegedly forgave $38,000 she owed SCU without any notice to the board.

On January 16, 2016, the board became aware of allegations regarding Simmons' alleged financial improprieties, sexual relationship and other SCU policy violations. When confronted by the board on Jan. 19, Simmons said he was shocked about the allegations and expressed outrage that he would be questioned after his lengthy employment. Although Simmons admitted he was in a relationship with his administrative assistant, he said it did not begin until after she left SCU.

Simmons was placed on paid leave pending an investigation, but before it was completed, he met with the board on Jan. 27 and admitted the allegations were true, according to court documents.

Simmons has denied SCU's allegations of misrepresentation and breach of fiduciary duty, court records show.

Instant Insights /

Former CEO Ordered to File Amended Complaint Against Service CU

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