Dec. 21, 2012 – NCUA announced Thursday it is suing David Addison, former CEO of the conserved Texans CU, for allegedly breaching his fiduciary duty to members and for making “grossly negligent” investments that led to the downfall of his former institution.
In a suit filed in Federal District Court in Dallas, NCUA claims that Addison pursued a high-risk business and investment strategy that included acquiring the financial services firm OBS Holdings, Inc. In doing so, NCUA says, Addison ignored counsel that the acquisition was extremely risky and was impermissible under Texas law. The agency also claims that Addison knew his actions could significantly injure the credit union.
NCUA says the investments cost Texans CU roughly $16 million in losses and led to the near insolvency of the institution. In 2011, NCUA conserved the credit union. Since then, the credit union has improved operating efficiencies and risk-management strategies, earning more than $21 million in 2012 as of Nov. 30.
In announcing the action, NCUA Board Chairman Debbie Matz said that any recoveries in the case will be returned to Texans CU and assist in NCUA’s efforts to rehabilitate the credit union. “Mr. Addison’s actions were very costly to the credit union, and financial institution regulators have a responsibility to hold accountable those parties—institutions or individuals—when they undermine safety and soundness.”