ROCKY HILL, Conn.–Two former executives of Nutmeg State Financial Credit Union have filed suit against the CU alleging they were fired in retaliation for talking to regulators about what they claimed were improper accounting practices at the CU.
The suit was filed by Nutmeg State’s former CFO, Timothy Ross, and former VP-Lending, Shannon Hall, who allege NSFCU artificially inflated profits to boost its top executive's pay, according to the Hartford Business Journal as reported on HartfordBusiness.com.
The credit union in response has denied any wrongdoing, and neither state nor federal regulators have taken any action in response, according to HartfordBusiness.com.
Ross and Hall are seeking back pay, lost benefits, punitive and other damages, and legal costs and fees.
In addition to the credit union, also named as a defendant is CEO John Holt. The suit alleges Holt instructed Hall "on multiple occasions" to push expected loan losses out to a future date, instead of recording them the same month they were likely to occur on the balance sheet as an "allowance for loan and lease losses,” HartfordBusiness.com reported. In addition, the lawsuit alleges Holt instructed Ross to stretch out expenses incurred after the closing of an East Windsor, Conn., branch last year, and that Holt refused to let Ross alter the valuation of a Glastonbury, Conn., facility that the former CFO believed was overvalued by $1 million, according to the report.
"By pushing out the losses … Holt was able to keep … NSFCU's profits artificially inflated, which allowed his bonus and SERP to be funded, even in months when … NSFCU's profit targets would have fallen short, and also at the expense of proper reporting practices and against the interests of … NSFCU's members and the public in general," according to the suit as reported by HartfordBusiness.com.
The suit alleges four counts of wrongful discharge and one count of defamation related to a negative performance review placed in Hall's personnel file.
While declining to comment on the suit, the Hartford Business Journal said Nutmeg State provided it with a May 31 letter from the audit firm Nearman, Maynard, Vallez in which it said it did not find any issues in the audit for the year ended June 30, 2015.
The Hartford Business Journal quoted Lisa Asadourian, a senior vice president with the credit union, as saying the outside auditors "directly refute the sensationalized claims made in this lawsuit and reinforce the fact that the lawsuit has no merit."