WesCorp Directors Shift Blame To NCUA For Massive Corporate Failure
LOS ANGELES – Former directors of WesCorp FCU urged a federal court today to dismiss a civil suit brought against them by NCUA, saying the federal regulator was well aware of what WesCorp managers were doing in the build-up to the failure of the one-time $34 billion corporate.
“The NCUA knew then what Defendants were doing and how they were doing it, said the directors in their court brief. “It therefore has no business suing them now for billions of dollars on account of business decisions that the NCUA’s statutes and regulations and its examiners permitted – and indeed applauded – at the time.”
The directors assert that at the time WesCorp was investing in risky mortgage-backed securities, “NCUA gave WesCorp the highest level of expanded investment authority, including permission to buy securities rated as low as BBB, and that the NCUA therefore subjected WesCorp to the very highest level of regulatory scrutiny including on-site NCUA examiners who had real-time access to all (asset liability management reports) and Board reports, and daily access to WesCorp personnel.”
“When big losses occur, there is an all-too-human desire to find scapegoats,” stated the directors. “Doubtlessly WesCorp made some investment decisions that, with 20/20 hindsight and full knowledge of the credit crisis of 2008-09, one might wish it had not made. But it is one thing to regret an investment and quite another to ask a group of unpaid volunteer directors to ante up $6.8 billion in damages for having made, in perfect good faith, some investment decisions that did not work out as one might have hoped.”
The motion for summary judgement to dismiss the charges against the directors comes in response to NCUA September 1 amended complaint that charged the directors and top executives of the failed corporate with breach of fiduciary duty and gross negligence in overseeing the demise of the corporate giant. The WesCorp failure is projected to cost as much as $7 billion, which will be paid by natural person credit unions all around the country.
The defendants in the NCUA suit asking for dismissal are: Robert Harvey, the chairman of the board and 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; Sharon Updike, CEO of Eagle Community CU; and Bill Cheney, former CEO of Xerox FCU (now Xceed Financial FCU) and now president and CEO of CUNA, and Robert Burrell, former executive vice president and chief investment officer.
Also named as defendants in the NCUA’s amended complaint are Robert Siravo, former CEO of WesCorp, Todd Lane, chief financial officer, Timothy Sidley, former chief risk officer; and Thomas Swedberg, former head of human resources.