ALBANY — The former chief financial officer of SEFCU is taking legal action over his ouster earlier this year in what he alleges was retaliation for his whistleblower concerns about the credit union’s CEO and board of directors.
Attorney Daniel M. Sleasman filed the complaint on behalf of David J. Gosstola on Friday in state Supreme Court, Albany County. It alleges that by firing Gosstola, SEFCU violated its own Whistleblower Policy and penalized him for doing what he was obligated to do under that Policy.
The complaint seeks compensation for the damages Gosstola has sustained.
Sleasman had no comment when contacted Wednesday.
SEFCU provided a statement via email:
“SEFCU has been notified of the lawsuit filed by former CFO David Gosstola. The lawsuit questions the grounds for his termination and makes unfounded allegations about practices at SEFCU.
“Out of respect for the legal process, SEFCU will not comment further on the personnel matter.
“Regarding the lawsuit’s further allegations, following established protocols, SEFCU fully disclosed Mr. Gosstola’s claims to its federal regulator, the National Credit Union Administration, when he brought them to our attention last year. Furthermore, SEFCU engaged independent law and accounting firms to conduct a thorough review of the situation. No evidence of wrongdoing by SEFCU was identified.”
Albany-based SEFCU is one of the largest credit unions in the state, with more than 50 branches, 360,000 members and $4 billion in assets. Gosstola, a certified public accountant since 1985, was hired in 2008 as its chief financial officer.
The complaint focuses heavily on the actions of SEFCU’s board of directors and its longtime President and CEO, Michael J. Castellana. The complaint includes the following assertions and allegations:
- The SEFCU Whistleblower Policy states SEFCU has an obligation to guard against illegal, fraudulent and dishonest conduct and to protect persons reporting such conduct; it expressly prohibits retaliation against whistleblowers.
- The policy required Gosstola to report misconduct and stipulated that failure to do so could result in a penalty as severe as termination.
- Gosstola became aware that Castellana had cultivated personal support and loyalty from SEFCU’s board of directors and that it had effectively delegated to him its non-delegable responsibility to determine SEFCU’s direction and provide general oversight.
- Before January 2018, Gosstola learned Castellana had communicated confidential information related to commercial lending to third parties with whom Castellana had a personal and/or business relationship.
- Castellana had reduced Gosstola’s financial reporting responsibilities and communications with the board.
- Gosstola told Castellana he objected to these things, and asked that he be allowed to fully perform his duties under his job description; Castellana did not address the requests, and referred to them in internal communications as “Dave issues” and “lack of collaboration.”
- Gosstola came to believe that Castellana was implementing a scheme to assume control of SEFCU; undermine him as CFO; obtain perks such as a full-time armed guard/chauffeur; and manage the board of directors’ review and approval of his compensation and benefits.
- In determining Castellana’s compensation, the board did not seek or consider advice from Gosstola or independent advisers and did not consider pay and benefits received by comparable executives.
- Gosstola had indications that Castellana had caused SEFCU to enter transactions with parties with whom he had business and professional relationships, including for construction, financing and leasing of SEFCU offices and branches.
- Castellana sought and gained board approval for a multimillion-dollar gift for naming rights to an athletic facility for a recipient with whom he had board and fiduciary positions and relationships. (That proposal was later withdrawn.)
- Some or all of these actions by Castellana posed serious risks to SEFCU and its members.
- On Jan. 19, 2018, Gosstola delivered a letter stating his concerns to Castellana, who didn’t reply. The SEFCU Supervisory Committee retained Rochester accounting firm Mengel, Metzger Barr to review the letter and Gosstola’s whistleblower complaint on SEFCU’s behalf.
- The firm delivered its report to SEFCU Sept. 6, 2018; Gosstola never got a copy.
- SEFCU retained law firm Barclay Damon to review the report, and on March 29, 2019, the firm told Gosstola it had completed an investigation; the firm did not interview him for its “rebuttal report” dated Dec. 28, 2018, and did not give him or Sleasman a copy of the report, though it let Sleasman look at it in the Barclay Damon office.
- Gosstola’s complaint does not characterize the results of that report, but asserts the investigation was not independent or objective, and was intended instead to discredit Gosstola’s whistleblower complaint and the accounting firm’s report.
- On May 8, 2019, Barclay Damon summoned Gosstola and Sleasman to its Albany office and told Gosstola he was terminated immediately, and was not even to clean out his office. He was not given SEFCU’s customary severance compensation.
Gosstola’s complaint says he has suffered economic loss, emotional harm and damage to his professional reputation; he seeks compensatory and punitive damages in amounts to be determined at trial, as well as attorneys’ fees.
SEFCU’s website lists 10 chiefs on its executive team but no chief financial officer. There is a chief financial well-being officer, but that position has existed for a while and pertains to the finances of SEFCU members, not financial oversight of the organization.