SAN DIEGO — Two senior figures supporting California Coast Credit Union’s lawsuit to enforce its proposed merger with San Diego County Credit Union (SDCCU) argue in sworn court filings that regulatory concerns cited by SDCCU were overstated, misinterpreted or based on theoretical risk rather than evidence of wrongdoing.
As the CU Daily has also been reporting, the two CUs had initially announced plans to combine and create a $13.6-billion institution. But the situation soured and the $3.3-billion California Coast Credit Union sued the $9.2-billion San Diego County Credit Union in California Superior Court, alleging SDCCU improperly terminated an agreement to merge the two San Diego-based cooperatives.
San Diego County CU has responded by saying it has sought to end its proposed merger with California Coast Credit Union after NCUA raised concerns about the combination and after determining that compliance risks and cultural deficiencies at Cal Coast posed unacceptable threats to members, according to an 18-page sworn declaration filed Feb. 5 in San Diego Superior Court.
But the CEO of California Coast CU, Todd Lane, has accused San Diego County Credit Union of suffering from a “management-manufactured liquidity crisis” and paying its top executives tens of millions of dollars, as part of a court filing seeking to block SDCCU from terminating a proposed merger between the two institutions, as the CU Daily reported here.
Statements From Executive, Consultant
In a new review of documents in the case ty the CU Daily, declarations have been submitted by California Coast Chief Audit & Risk Officer Kellen C. Gill and banking consultant David Abshier.
Gill told the court that the merger agreement explicitly contemplated that SDCCU’s policies would govern the combined credit union because SDCCU, as the larger institution, was already overseen by the National Credit Union Administration’s Office of National Examinations and Supervision, known as ONES.
Gill further stated that California Coast “consistently and repeatedly affirmed” that understanding throughout integration planning and communications with SDCCU executives.
What was Envisioned
Abshier’s declaration similarly states that the transaction structure envisioned SDCCU as the surviving legal entity, operating under its charter while integrating selected California Coast programs where appropriate.
Meanwhile, Gill also disputed suggestions that internal working documents reflected an effort to alter SDCCU governance, saying draft comparison materials were created only to identify whether any California Coast procedures might enhance SDCCU’s existing framework.
Point of Contention
The court documents reveal a major point of contention involves a series of legal analyses commissioned during integration.
Gill said those memoranda were intended to “help inform decision-making around regulatory compliance” and support due diligence, not to identify violations.
He asserted:
- The memos did not identify any actual legal or regulatory violation by California Coast.
- They provided risk-based guidance for business decisions, weighing costs and benefits rather than concluding misconduct.
Gill said he was unaware of documented allegations of disparate treatment or regulatory breaches tied to the practices discussed.
‘Assumed Allegations’
Abshier’s declaration to the court echoed that view, stating that the criticisms relied on “assumed allegations” and were not supported by objective evidence of supervisory concern or consumer harm.
Operational Issues
In his statement, Gill addressed several operational issues cited by SDCCU in its filings, including:
Negotiated CD Rates
Gill said a legal review concluded there was “no current federal prohibition” on individualized certificate-of-deposit pricing, though regulators could scrutinize unfair application. He denied claims the program was hidden from regulators or inherently noncompliant.
Technology Loan Program
Gill said loans offered to university students and faculty were documented and later reclassified in regulatory reports to address SDCCU’s concerns, even though California Coast did not believe the original reporting was incorrect.
Abshier said he concluded the record did not demonstrate the program created supervisory risk or regulatory noncompliance.
Spanish-Language Courtesy Disclosures
Gill said bilingual materials were optional copies provided after execution of English documents and later discontinued to avoid dispute.
Abshier characterized their use as limited and supplemental rather than a systemic disclosure failure.
Marketing of Investment Products
Gill said legal review found no explicit regulatory prohibition, recommending only “modest enhancements” to mitigate risk.
Regulators Evaluate Systems, Not Isolated Issues
Abshier, who said he is a former federal examiner who has been retained as an expert, framed the dispute around how regulators assess compliance.
In his statement, he described a compliance management system as the governance and monitoring structure designed to ensure adherence to law and manage risk across the institution.
Regulatory evaluations, he said, focus on whether the overall system is reasonably designed to prevent and correct problems — not whether theoretical risks can be identified in isolation.
Abshier said it is his opinion the matters cited in support of terminating the merger were “theoretical, limited in scope, remediated, and would not reasonably be expected” to produce material supervisory concerns.
Due Diligence History Also Highlighted
Abshier noted that outside firms conducted due-diligence before the agreement was finalized and that findings reported to leadership did not identify material issues, after which SDCCU leadership recommended proceeding with the merger.
