LOS ANGELES – A federal judge on Friday ruled NCUA’s oversight of WesCorp FCU is not on trial in the civil suit the federal regulator brought against executives of the failed one-time $34 billion corporate credit union.
In a nuanced ruling delivered after Friday’s hearing in U.S. District Court for the Central District of California, Judge George Wu said the WesCorp figures may not raise the issue of NCUA’s oversight of the giant corporate, except when the issue of what NCUA knew and approved of prior to the March 2009 NCUA conservatorship of WesCorp. However, NCUA’s pre-conservatorship actions, including its five-day-a-week, on-site examiner and regular waivers of its own investment regulations to allow WesCorp to buy risky securities, will not be admissible as a line of questioning in the case, Judge Wu ruled.
In fact, ruled Judge Wu, the WesCorp figures have conceded that NCUA cannot be held liable for its pre-conservatorship conduct. “Therefore, the affirmative defenses that are based upon the NCUA’s [pre-conservatorship] conduct should be stricken,” wrote the judge.
The WesCorp figures – CEO Bob Siravo, CFO Todd Lane, Chief Investment Officer Bob Burrell, Chief Risk Officer Timothy Sidley and Human Resources Director Thomas Swedberg – claim that NCUA’s Office of Corporate CUs and its on-site examiner knew all along of their plans and investment practices, so they should not be found guilty of gross negligence in the huge corporate failure, as NCUA alleges in its suit. The WesCorp figures claim that NCUA's actions before the 2009 takeover are relevant to their defense because they were acting “with the go-ahead from” NCUA.
The judge said NCUA’s action are not on trial, but can be used to determine whether the WesCorp executives were actually negligent.
Judge Wu also said the question of whether or not NCUA’s 2010 suit came after the expiration of the relevant statute of limitations will be determined at a later date.
The judge also set another hearing for Feb. 6 on the claims by the WesCorp figures that a CUMIS directors and officers liability bond requires WesCorp (now NCUA as liquidating agent) to pay their legal fees and indemnify them against civil clams such as the suit brought by NCUA.
