Federal Court Agrees To NCUA Takeover Of WesCorp Suit
LOS ANGELES – A federal judge agreed yesterday to let NCUA assume the role of the plaintiff in a suit against directors and officers of WesCorp FCU, creating a strange case of the federal regulator as both plaintiff and defendant in the case.
In a ruling issued yesterday afternoon, Judge George Wu said federal law grants NCUA, as conservator of the one-time $34 billion corporate credit union, “all rights, titles, powers, and privileges of the credit union, and of any member, accountholder, officer, or director of such credit union with respect to the credit union and the assets of the credit union...”
“That any derivative claim,” ruled the judge, “now belongs to the NCUA is supported by both a plain reading of the statute in question and relevant case law.”
The plaintiffs in the case, seven credit union members of WesCorp, had argued that to appoint NCUA the plaintiff, after having appointed it defendant representing the WesCorp officers and directors, would be “absurd and impractical.” But Judge Wu ruled there is no statutory “absurd” or “impractical” exception to the relevant law, which must be interpreted to give NCUA authority over the case unless the result would be absurd or impractical.
The credit unions allege that WesCorp irresponsibly and negligently invested in mortgage-backed securities without due care, which resulted in at least $2 billion of member funds being lost.
The seven credit unions are mostly middle-sized institutions that are among WesCorp’s 1,000 members from around the country. They are: 1st Valley CU in California, Cascade FCU in Washington state, Glendale Area Schools FCU in California, Kaiperm Northwest FCU in Oregon, Northwest Plus FCU in Washington, Stamford FCU in Connecticut and Tulare County FCU in California.
The seven credit unions, all WesCorp members, have sued former WesCorp CEO Bob Siravo, CFO Jim Hayes and Chief Investment Officer Bob Burrell, as well as Bill Cheney, the newly named president of CUNA who not only served on the board at WesCorp, but U.S. Central FCU too.
It also names as defendants the CEOs of some of the biggest credit unions in the country who served on the WesCorp board, including: Bob Harvey, president of Seattle Metropolitan CU, who was WesCorp chairman; Jim Jordan, president of Schools Financial CU; John Merlo of Premier America CU; Warren Nakamura of Honolulu FCU; and, Gordon Dames, the well-known retired president of Mountain America CU. Top executives of another six big credit unions also were named.
The ruling was issued after a hearing in the case held last Thursday.