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News Now

CU System
NCUA files second amended complaint in WesCorp suit
LOS ANGELES, Calif. (2/28/11)--The National Credit Union Administration (NCUA) filed its second amended complaint in its $6.8 billion lawsuit against directors and officers of Western Corporate FCU (WesCorp) in a U.S. District Court in Los Angeles. The allegations in the complaint, filed Feb. 22, do not deviate much from NCUA's first amended complaint. In that complaint, NCUA alleged negligence and breach of fiduciary duties. The second amended complaint alleges that WesCorp officers and directors breached fiduciary duties by failing to impose "prudent concentration limits" on WesCorp's increasing concentration of private label mortgage backed securities (MBS) and Option ARM MBS. Defendants in the case will have the opportunity to answer the second amended complaint by filing another motion to dismiss the case. The court has not yet established the timetable for filing such pleadings in the case. U.S. District Judge George Wu allowed NCUA to file the second amended complaint during a tentative ruling that favored the former directors. In that tentative ruling, Wu warned that NCUA would have to prove the directors are not covered by California's Business Judgment Rule, which provides directors "broad discretion in making corporate decisions and [allows] these decisions to be made without judicial second-guessing in hindsight (News Now Feb. 3). He also ruled in another tentative ruling that the allegations of improper motives or conflict of interest are insufficient and said "the end result [of the amended complaint] might very well be the same."


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