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News Now

Washington
WesCorp directors seek NCUA suit dismissal
LOS ANGELES, Calif. (4/20/11)--The former directors and officers of Western Corporate FCU (WesCorp) have asked U.S. District Judge George Wu to dismiss the National Credit Union Administration’s second complaint in its $6.8 billion lawsuit against the former leaders of the now conserved corporate. The former WesCorp directors accused the NCUA of 20-20 hindsight in the charges lodged in its second complaint, which was filed on Feb. 22. That document 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. Overall, the NCUA has repeatedly claimed that the former WesCorp officials did not use sufficient care when they made certain investments before the recession hit the corporate system. In their response to the second NCUA complaint, the former directors state that their decisions on investments are protected from retroactive second-guessing under California's Business Judgment Rule if the process by which they made decisions reasonably relied on expert input from management and others. The directors contend that NCUA has failed to allege any departure from this type of process. In addition, the former directors note that the NCUA’s second complaint “consists of retreads–-old allegations made fatter but in no material way made better.” The defense motion also notes that while the NCUA has held WesCorp under conservatorship since 2009, and has had full access to that corporate’s books and records since that time, the agency today “is no closer to stating a claim than when it started this crusade against unpaid, uninsured volunteer directors. “The claims against the directors should be dismissed without further leave to amend,” the motion adds. Judge Wu earlier this year allowed the agency to file its 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). Wu at that time also ruled that the NCUA’s 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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