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WesCorp directors press case for dismissal of suit
LOS ANGELES (7/22/11)--Western Corporate FCU's directors and officers Wednesday informed a federal court in Los Angeles that a lawsuit brought against them by the National Credit Union Administration (NCUA) stemming from WesCorp's collapse is rendered "implausible" because of arguments NCUA makes in two other lawsuits recently filed against companies that sold residential mortgage-backed securities (RMBS) to WesCorp. NCUA, as WesCorp's liquidating agent, sued JP Morgan Securities and others in June. It sued RBS Securities and others in early July. Earlier the agency had sued WesCorp's directors for negligence, saying they misled the corporate into purchasing AAA-rated residential RMBS. According to the judicial notice filed by the WesCorp directors and officials in the U.S. District Court Central District of California Western Division in Los Angeles, NCUA in both the RBS complaint and the JP Morgan complaint alleges that those companies "misled WesCorp into purchasing AAA-rated RMBS by making misrepresentations and omissions in registration statements, prospectuses and prospectus supplements" and that they "misrepresented to WesCorp the quality of the mortgages in the pools of RMBS and the credit enhancement protections against financial loss." NCUA said in its RBS and JPMorgan suits that WesCorp "was not aware of the untrue statements or omissions" or "did not know of these untruths or omissions" made by the securities firms "at the time WesCorp purchased the certificates." NCUA also stated that investors such as WesCorp "had limited or no access to information concerning the actual quality of loans underlying the RMBS" and that WesCorp would not have purchased the securities had it known of the misrepresentations and omissions. NCUA's allegations in the two suits are "admissions that undercut and render implausible" the allegations it made against the WesCorp directors and officials, said court documents by the WesCorp group. NCUA had argued in that case the directors had acted "'clearly unreasonably' under the circumstances known to them at the time." The agency's "admissions will make it even clearer that the director defendants and the officer defendants made decisions based on the information available to them at the time. If that information was less than the truth, it was, at least according to the NCUA, the fault of others, and not the fault of the defendants here," said the judicial notice. The notice also said an NCUA press release "contradicts and therefore renders implausible…" its arguments against the WesCorp officials/directors and "highlights how difficult it was at the time to foresee problems with mortgage-backed securities." The directors filed a similar judicial notice after the JPMorgan suit was filed by NCUA.


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