A former chief financial officer of Rock Hill, Connecticut-based Nutmeg State Financial Credit Union (NSFCU), as well as his top lieutenant, have filed a civil lawsuit against the credit union claiming they were fired in retaliation for communicating with regulators about what they believed were improper accounting practices at the credit union, according to the Hartford Business Journal.
The complaint alleges the credit union artificially inflated profits through earnings management to boost the pay of the credit union's CEO, John Holt.
According to the complaint, "[b]y pushing out the losses, … Holt was able to keep … NSFCU's profits artificially inflated, which allowed his bonus and SERP [supplemental executive retirement plan] 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."
The plaintiffs claim that earnings management included underfunding the credit union's allowance for loan and lease losses account and stretching out the cost of closing the credit union's East Windsor branch.
The plaintiffs allege that those alleged practices violated state and federal law and were inconsistent with Generally Accepted Accounting Principles.
The plaintiffs are asking for back pay, lost benefits, punitive and other damages, and legal costs and fees.
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