BIRMINGHAM, Ala.-Thomas Bonds, CEO of CorporateAmerica Credit Union, said potential liability of the former board members of WesCorp and the degree to which they will have to pay related legal expenses has become due-diligence issues for anyone considering serving on a corporate's board.
"It is extremely important for prospective board members of corporate credit unions to review the bond coverage in detail before accepting a position on the board," Bonds said. "It appears, according to the Credit Union Journal article, there was an opportunity to purchase additional coverage that might have mitigated the losses to the directors, and it appears that WesCorp did not purchase that supplemental insurance. So I think the first question any prospective or current board member should ask before serving on a corporate board is, "What happens regarding legal fees for investment losses and is supplemental coverage in place?"
When asked whether uncertainty surrounding personal liability might deter the CEOs of natural-person CUs from participating on a corporate CU's board, Bonds responded, "It would deter me."
With the developments in the WesCorp case, Bonds said CorporateAmerica will be moving to review the supplemental coverage it provides its board members, as it is already scheduled to review its bond coverage at its December board meeting."
One of the things I will recommend to the board of directors is to buy the supplemental insurance," Bonds said.
CorporateAmerica CU, which has been among the best performing corporates during a time that has seen five other corporate CUs placed in conservatorship, does not pose any of the kinds of risk represented by WesCorp, Bonds noted. "I am not concerned about losses at corporate America because everything we have is federally backed. But nonetheless, we need to go ahead and get the addition coverage in place so that our board is not deterred from continuing to serve."
