LOS ANGELES – Seven credit union members of WesCorp FCU pulled out of the fraud suit against officers and directors of the failed corporate yesterday, leaving NCUA to seek recompense from insurers of some 15 individuals who headed the one-time $34 billion institution before its failure.
The seven credit unions, who filed the suit in federal court here earlier this year only to have the suit taken over by NCUA as conservator of the troubled corporate, cited “judicial economy and efficiency” as the reason for their decision to forgo participation in the case.
Their decision comes after NCUA on Tuesday ratcheted-up the claims in the case with additional allegations of negligence and fraud against top WesCorp management and 12 of its directors – all of them CEOs of large credit unions. The officers and directors, claimed NCUA, “were negligent and grossly negligent and they breached their fiduciary duties to WesCorp.”
The seven credit unions are: 1st Valley CU, Cascada FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU and Tulare County FCU.
The suit seeks more than $1 billion in damages which would be paid by the holders of Directors and Officers Liability policies WesCorp took out on behalf of the defendants.
Lawyers for the credit unions did not return phone calls seeking comment.
