LOS ANGELES – Claiming that “hindsight is 20/20,” the former directors of WesCorp FCU asked a federal court yesterday to dismiss NCUA’s negligence suit against them over the failure of the one-time $34 billion corporate.
In yesterday’s motion to dismiss, the WesCorp figures assert that claims in NCUA’s amended suit “boil down to the unremarkable proposition that, in hindsight, WesCorp would have fared better had it bought fewer private-label mortgage-backed securities or unloaded them sooner.”
“Hindsight is, as the cliché goes, 20/20,” the directors told the court, “But hindsight cannot overcome the Business Judgment Rule. And in this case, the NCUA’s own admissions
undercut whatever minimal effect hindsight might otherwise have. For the NCUA, in its own words, has admitted that at the time everyone – the NCUA included – ‘knew’ private-label MBS to be a low-risk investment permitted by the NCUA’s enabling statute and rules, and just as safe as the MBS issued by government sponsored enterprises such as Fannie and Freddie.”
In its suit, NCUA claims that the management and directors of WesCorp should have know when they loaded up the corporate with billions of dollars of subprime and Alt-A private label MBS that those securities were of increasing risk of failure. The failure of many of those securities were cited by NCUA for the corporate’s collapse amid a $7 billion loss.
The WesCorp directors note that as troubles built in the corporate’s investment portfolio, NCUA had two examiners on site at WesCorp, with real-time access to WesCorp’s investment decision-making. And 2009, NCUA has controlled all of WesCorp’s books and records. “Yet today the NCUA is no closer to stating a claim than when it started this crusade against unpaid, uninsured volunteer directors – directors who never took a dime out of WesCorp for themselves;
directors who entrusted WesCorp with millions of dollars of their own credit unions’ money. Enough is enough.”
NCUA has sued the directors, who were CEOs of some of the biggest credit unions in the country, including CUNA President Bill Cheney, who served on the WesCorp board as CEO of Xerox FCU (now Xceed FCU), Robert Harvey, CEO of Seattle Metropolitan CU; James Jordan, CEO of Schools Financial CU; Timothy Kramer, CEO of Keypoint CU; Robin Lentz, CEO of Cabrillo CU; John Merlo, CEO of Premier America CU; Gordon Dames, former CEO of Mountain America CU; Warren Nakumara, CEO of Honolulu FCU; Brian Osberg, CEO of Potelco United CU; David Rhamy, CEO of Silver State Schools CU and Sharon Updike, CEO of Eagle Community CU.
Also named as defendants in the NCUA’s amended complaint are Robert Siravo, former CEO of WesCorp, Todd Lane, chief financial officer, Robert Burrell, former executive vice president and chief investment officer, Timothy Sidley, former chief risk officer; and Thomas Swedberg, former head of human resources.
