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Court action could make NCUA plaintiff for WesCorp claims CUNA
WASHINGTON (7/21/10)--A U.S. District judge's tentative ruling, which granted the National Credit Union Administration's (NCUA) motion to substitute itself for plaintiffs claiming certain losses in a lawsuit stemming from Western Corporate FCU's (WesCorp's) conservatorship, leaves open the possibility the agency could be named substitute plaintiff for all claims, says the Credit Union National Association (CUNA). In the ruling Thursday, U.S. District Judge George H. Wu in the U.S. District Court Central District of California, Los Angeles, wrote that he is inclined to grant NCUA's motion to take over the derivative claims in the case "at the very least." He also stated that the plain language of the Federal Credit Union Act indicates that NCUA seems to be able to take over the "direct claims" as well, but that NCUA's brief seemed to concede that the plaintiff credit unions could make the "direct" claims. "If indeed NCUA is prepared to concede that point, the motion would be resolved in that fashion--permitting the NCUA (or its Board) to substitute in as plaintiff on any derivative claim(s) and allowing plaintiffs to continue as plaintiffs on any direct claims," said Judge Wu. CUNA reviewed the ruling. "This tentative ruling leaves open the possibility of NCUA being named the substitute plaintiff for all claims," explained Eric Richard, CUNA general counsel. "It will be interesting to see how the court rules going forward, especially considering that the plaintiff credit unions have attempted to make NCUA's performance as regulator a central issue," he told News Now. NCUA, as conservator of WesCorp, succeeded in transferring the lawsuit from state to federal court and sought to intervene as a plaintiff in a case brought by seven natural person credit unions against individuals who were former and current directors, officers and supervisory committee members at WesCorp when it went into conservatorship and against RiskSpan Inc., WesCorp's third-party risk management company. The plaintiffs--lst Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU, and Tulare County FCU-- filed the suit on Nov. 24 in Los Angeles County Superior Court. They claim the defendants were negligent and breached their fiduciary duties in connection with WesCorp's investments in residential mortgage-backed securities and collateralized debt obligations. In opposing NCUA's substitution as plaintiff, they alleged the agency "is hopelessly conflicted regarding the failure of WesCorp and cannot be expected to diligently prosecute all claims that may belong to WesCorp." (News Now June 28). A status conference on the amended complaint is set for Aug. 5. A scheduling conference previously set for July 26 has been continued to Sept. 9.


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