Jeffrey Moats served as CEO for the Edinburg Teachers Credit Union (ETCU) in South Texas for more than 25 years. Under his leadership, the ETCU was almost always the state’s top performer among credit unions of all sizes and surpassed every semi-annual state audit. The ETCU’s board of directors and ownership (comprised of the credit union’s members) alike praised Moats’ management skills and the ETCU’s resulting stellar performance.
In March 2020, the credit union’s financial condition was as it had historically been—excellent. By March 2021, one year into the COVID-19 pandemic, financial problems prompted the Texas Credit Union Department to order the ETCU into conservatorship—where the operation of the credit union is temporarily taken over by federal regulators—under the National Credit Union Administration (NCUA), the federal agency that regulates the nation’s credit unions.
The NCUA immediately fired Jeffrey and threw him out of the building with little more than the clothes he was wearing. In addition to Jeffrey’s retirement and personal bank accounts, the agency seized every piece of property in his longtime workplace, including personal belongings of great value to him.
Jeffrey asked that his property be returned, including his retirement savings, as well as post-termination benefits contractually owed to him. The credit union eventually returned his personal belongings and $1 million retirement account after the NCUA found no evidence that he improperly mixed personal and credit union assets.
The NCUA and the Texas agency ended the conservatorship in early 2023 without ever resolving the issue of Jeffrey’s post-termination benefits. But when Jeffrey went to state court to recover what he’s owed under contract, the NCUA accused him of breaching his fiduciary duties to his employer and unjustly enriching himself.
The accusations are inexplicable and absurd. But the punishment is staggering—$4 million in restitution, at least $1 million in civil penalties, and banning Jeffrey for life from ever working in the banking sector again.
Proving wrongdoing in a court of law would be challenging for the agency. Rather than a courthouse, however, the NCUA is prosecuting Jeffrey in its own house, where the deck is stacked in its own favor; the three people who run the agency and make rules for credit unions also ran Jeffrey’s bank for two-and-a-half years and pursued him with bogus accusations and crushing penalties. They now want also to decide whether to award themselves millions of dollars.
These same three agency heads then launched an administrative proceeding in which an in-house administrative law judge conducts an internal tribunal to validate the agency’s punishment of Jeffrey. Appeals of ALJ decisions go before the same three people who, acting as appellate judges, are incentivized to punish Jeffrey rather than make a justified decision. The NCUA acts as accuser, prosecutor, judge, jury, and executioner—and gets away with it.
The Constitution guarantees basic principles of fairness, including the right to a fair trial before an impartial judge and jury. This means a real court of law, not ad-hoc procedures set by executive agencies. Furthermore, the civil penalties of more than $1 million are legal remedies the NCUA should pursue only before a jury in court.
There are deeper constitutional issues with the NCUA and ALJs. Officials empowered with executive authority must be answerable to the president to keep them—and their boss—accountable. The Supreme Court has ruled that insulating ALJs with multiple layers of removal protection is unconstitutional. The NCUA’s ALJs are shared by three other financial agencies—the FDIC, the Securities and Exchange Commission, and the Federal Reserve. These ALJs can be removed only for cause and, in Matryoshka doll-like fashion, only with unanimous agreement among all four agencies.
In short, the NCUA is conducting an unconstitutional proceeding with unconstitutional ALJs and violating Jeffrey’s fundamental constitutional rights.
Represented at no charge by PLF, Jeffrey is fighting back in federal court to restore his due process right to a fair trial before a neutral judge and jury and to end coercive, sham trials in front of unlawfully insulated ALJs.
Rusty Hardin & Associates, LLP, is co-counsel with Pacific Legal Foundation in this case.