LOS ANGELES-Lawyers for NCUA told a federal judge here that the federal agency's June 20 suits against JP Morgan and RBS Securities should not exonerate officers and directors of WesCorp FCU in the 2009 failure of the one-time $34-billion corporate.
"The allegations of the JP Morgan Complaint are not a shield protecting the defendants from further scrutiny of their own culpability for the failure of WesCorp," the NCUA lawyers asserted in response to allegations by the WesCorp defendants that the agency's suit claiming JP Morgan and RBS Securities misrepresented the sale of mortgage-backed securities to the corporate should disprove the agency's claims against WesCorp's former board and management.
The back-and-forth comes as NCUA says it is planning additional suits related to the sale of MBS in the failure of five corporates, and as Bank of America has agreed to pay $8.5 billion to pay investors who say they were harmed by the sale of MBS. BofA is now the parent of Countrywide Financial Corp., which was the biggest seller of MBS to WesCorp.
NCUA said the MBS included in the JP Morgan claims only amounted to $50 million of the $6.8 billion of losses that caused the San Dimas, California, corporate to fail. The much bigger cause of the WesCorp failure, according to NCUA, was the concentration of WesCorp's investments, as much as 70% of the portfolio at one point, in risky MBS.
The WesCorp figures note that the suit filed against JP Morgan Securities alleges that Wall Street firms "misled certain corporate credit unions-including WesCorp" about the safety of the then-AAA-rated residential MBS investments.
WesCorp was one of two corporates-U.S. Central was the other-where NCUA had a full-time examiner on site five days a week.
