WesCorp Suit Escalates, CUs Assail NCUA Role
RIVERSIDE, Calif. – A group of WesCorp FCU members suing the failed credit union over their loss of capital have asked a federal court to reject a bid by NCUA to take over their role in the case, charging the federal regulator has dragged its feet and shown itself to be incapable of pursuing their claims because of its own culpability in the failure of the one-time $34 billion corporate credit union.
The latest motion in the suit filed by seven credit unions across the country claims NCUA has shown little inclination to pursue claims against WesCorp officers during the 15 months the agency has run the corporate under conservatorship and is unlikely to do so because of its own potential liability for the failure. “Now, the NCUA – an entity that shares blame for the failure of WesCorp – seeks to substitute itself as Plaintiff, and wrest this litigation out of the hands of the seven retail credit unions that have prosecuted it to date, even though the NCUA, compromised as it is, has not yet determined whether it will pursue the action in their stead,” reads the motion.
Claiming NCUA continues “to shamelessly dilly-dally” on pursuing WesCorp claims, the credit unions note NCUA Chairman Debbie Matz’s recent concession that “NCUA shares some of the blame,” for the failure of WesCorp.
The WesCorp members filing the suit are: 1st Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU and Tulare County FCU.
The motion points out the often absurdity of federal conservatorship challenges, as NCUA has already adopted the position of defendant in the case because of its status as conservator of WesCorp – potentially pitting the federal regulator against itself as both plaintiff and defendant.
The lawsuit accuses WesCorp officers and directors of negligence and of breaching their fiduciary duties in the failure of the corporate giant, which wiped out $2 billion of capital owned by 1,022 credit unions, pushing many of them to the brink of disaster. The suit seeks damages from third-party insurers and others.
It has a potential for an ugly denouement for the credit union movement as it not only names the top executives of WesCorp as defendants, but some 20 CEOs and other top executives of the biggest California credit unions, as well as California CU League President Bill Cheney, who was recently hired to head CUNA.
“At this juncture,” urged the credit unions, “it would be inequitable to substitute the NCUA for Plaintiffs. If the NCUA is substituted for Plaintiffs, it may choose not to prosecute this matter. If the NCUA chooses to abandon the case, Plaintiffs would be denied any remedy whatsoever, in any capacity – be it direct or indirect.”
“Given the NCUA’s shared responsibility for the WesCorp failure, and the lethargy of its approach, it would be inequitable to hand the case over to the NCUA,” argued the credit unions.
NCUA declined comment last night.
Lawyers for the credit unions did not return phone calls seeking comment.