LOS ANGELES – Executives of WesCorp FCU, who claim NCUA is as culpable as they are for the spectacular failure of the one-time $34 billion corporate credit union, told a federal court here they plan to call examiners and all three members of the NCUA Board as witnesses in the agency’s multi-billion dollar negligence suit.
The case, if it goes to trial, promises to provide the first real glimpse of the role in the massive corporate failure of NCUA, which to date has kept a tight veil over its oversight of WesCorp and the other four corporate failures, U.S. Central FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU. A separate suit in the case of U.S. Central was settled this summer just days before it was scheduled to go to trial and the terms of the settlement as well as NCUA’s role in the U.S. Central case remain secret. No NCUA employee has been disciplined or terminated for their role in the corporate failures.
Among the broad list of witnesses that could be called by Bob Siravo, former CEO of WesCorp, Todd Lane, its chief financial officer, or Bob Burrell, chief investment officer are: Kent Buckham, who was chief corporate examiner at NCUA and now heads its new office of consumer affairs; Scott Hunt, current director of the Office of Corporate CUs; David Marquis, executive director who formerly was head of examinations and insurance with oversight over WesCorp examinations; and, NCUA Board members Gigi Hyland, Michael Fryzel and Debbie Matz. Matz was serving a first term on the board from 2002 to 2005, when NCUA approved WesCorp’s expanded investment authority and the purchase of exotic and risky investments, such as collateralized debt obligations, or CDOs.
The WesCorp figures also have listed several “resident” NCUA examiners, including Lance McAllister and Steve Sherrod, who they say by virtue of working on site at WesCorp’s San Dimas, Calif., offices five days a week knew all along and approved of the doomed corporate’s investments. On-site NCUA examiners at WesCorp had their own server and access to all documents, according to the WesCorp executives.
Also named are former corporate field examiners for NCUA, Dan Buckley and Bruce Bakke.
The WesCorp figures list representatives of the Wall Street rating agencies, Standard & Poor’s and Moody’s, who rated the mortgage-backed securities as Triple A, as required by NCUA before a corporate could invest in them.
NCUA claims in its suit that the WesCorp executives and directors were reckless in loading up on subprime and Alt-Alt MBS in 2005 to 2007, before the investments went sour and sunk the corporate giant at a projected cost to the credit union movement of $7 billion. The court has dismissed the NCUA charges against the directors, saying they were relying on the judgment of the management, Wall Street rating agencies and NCUA examiners in approving the investments.
The WesCorp figures have filed counter claims against CUMIS Insurance Society, saying the credit union insurer violated the terms of its directors and officers liability policies by failing to pay their legal fees in the suit.
