LOS ANGELES – Lawyers for former WesCorp FCU CEO Bob Siravo and CFO Todd Lane filed documents in federal court Friday saying they still want to depose Gigi Hyland on what she knew about the agency’s approval of the failed corporate’s risky investments, even though Hyland resigned from the NCUA Board the same day.
The filing comes as lawyers for NCUA are scheduled to argue in court Tuesday that neither Hyland nor NCUA Chairman Debbie Matz nor outgoing Executive Director David Marquis should be required to testify in the agency’s suit claiming negligence on the part of senior WesCorp executives led to the 2009 collapse of the one-time $34 billion corporate credit union. NCUA lawyers argue that information pertaining the agency’s oversight and approval of the failed corporate’s investments are readily available from lower-ranking NCUA officials, particularly those who ran its Office of Corporate CUs, so the top NCUA executives should not be compelled to testify.
The potential testimony could be explosive and may be the last time the public has an opportunity to learn what NCUA knew of the internal operations at WesCorp, where NCUA had an on-site examiner for 15 years. Lawyers for the WesCorp executives said earlier they plan to ask the NCUA Board members about their own role in approving in closed NCUA Board meetings the risky investments that eventually sunk the corporate giant.
The potential testimony of the top executives at NCUA, which claims the negligence of the WesCorp figures caused the failure of the corporate giant, comes as NCUA has launched a massive legal offensive against a half dozen Wall Street banks—claiming that faulty investments they sold WesCorp caused the demise of the institution. Lawyers for the WesCorp figures have said they will tell the court that NCUA’s position is contradictory.
NCUA has reached out-of-court settlements with three other former senior WesCorp executives: Chief Investment Officer Bob Burrell, former Chief Risk Officer Timothy Sidley and former Human Resources Director Thomas Swedberg, but the terms of the settlements have all been rendered secret and NCUA has refused to disclose details. In addition, a suit brought by Alabama’s Corporate America CU against top executives of U.S. Central, in which NCUA executives were also asked to testify, was also settled out of court under confidential terms that have yet to be disclosed to the public.
The NCUA lawyers are seeking to block Siravo's request to depose the NCUA Board members in his attempt to prove that the risky investments that sunk WesCorp were approved of beforehand by NCUA. The NCUA lawyers claim that federal law bars the depositions of high agency officials unless those officials have a "direct personal factual information pertaining to material issues in an action" or "the information to be gained is not available through other sources."
NCUA lawyers said Matz only joined the NCUA Board in August 2009, five months after NCUA seized the corporate giant “and she therefore lacks direct personal knowledge of events occurring prior to WesCorp’s failure in March 2009.” But the pleadings do not address Matz’s earlier service on the NCUA Board, from January 2002 to October 2005, when she was asked to vote in closed meeting numerous times on requests by WesCorp for exemptions from NCUA’s regulations in order to invest in exotic mortgage-backed securities. Siravo claims NCUA knew of and approved of the WesCorp investments as far back as 2005, when Matz was serving her first term on the NCUA Board.
Hyland served a chief lobbyist for the corporates before joining the NCUA Board in 2005. She had been serving as a so-called holdover on the three-member Board since her six-year term expired in August 2011 and left the board Friday.
