Lafayette Sues Former CEO, Son

KENSINGTON, Md. - Lafayette FCU has filed a multi-million dollar lawsuit against its former CEO and his son for their alleged role in the credit union's ill-fated conversion to mutual savings bank, the latest in a series of moves aimed at exacting retribution for the conversion debacle.

In a suit filed in state court in Maryland, the credit union attorneys claim former CEO Bill Brooks violated the terms of a 2004 separation agreement in which he agreed not to speak or write negatively about the credit union, its officers or directors; and also claim Brooks and his son, Bill Brooks Jr., were responsible for two Lafayette member websites that successfully fought the conversion to banks.

The sites allegedly published "false, defamatory and disparaging information" about the credit union, its officers and directors, according to the suit, which asks for damages of $6 million from both men.

Brooks Sr. said earlier that he has had no involvement in the attempts to thwart the credit union conversion and has been assiduous in staying clear of the controversy because of the terms of his separation agreement.

The action came a week after the credit union closed the checking account and cut off access to its ATMs for Scott Stiens, a leader of the conversion opponents, for his efforts to collect petition signatures at Lafayette branches for the recall of the board of directors. Stiens said last week he believes the action, which is tantamount to expelling him from the credit union, is illegal and he has asked NCUA to investigate.

Group Says It Has Signatures

Meantime, Steins said a group of members angry at the failed conversion attempt have exceeded the necessary 750 signatures on a petition seeking the recall of the board of directors and are preparing to present it to the credit union. The petition asks for a special meeting of members where the removal of the board would be voted.

Credit union officials would not comment last week.

Members approved the conversion of the $320-million credit union to mutual savings bank by the narrowest of margins-just 18 votes out of 5,000 cast-but irregularities in the 90-day ballot forced the credit union to withdraw its bid to convert charters.

The suit claims that Brooks Sr., who was well-known in the industry for his service on the NAFCU board, violated the "non-disparagement clause" in his separation agreement and asked the court to order him to repay $314,000 in severance and pay $3 million in damages for the alleged harm to the credit union's reputation and business prospects resulting from the failed conversion.

The suit was filed by the credit union's local law firm, of which Lafayette Chairman Arnold Rosenthal's brother is a principal partner.