LOS ANGELES (4/23/12)--The National Credit Union Administration (NCUA) has filed more documents in its negligence lawsuit against former Western Corporate FCU senior executives, telling a federal court in Los Angeles that , as the failed corporate's conservator, it has authority to deny the former executives indemnification and insurance coverage.
NCUA filed the documents April 18 in the U.S. District Court, Central District of California, Western Division, in response to counterclaims by the former WesCorp officials.
The original suit named as defendants: Robert A. Siravo, former president/CEO; Thomas Swedburg, former vice president of human resources; Todd Lane, former chief financial officer; Robert J. Burrell, former chief investment officer; and Timothy T. Swidley, former risk officer. Swedburg and Sidley have settled their lawsuits (News Now April 16).
In its response, NCUA said that "defendants may not pursue a claim for indemnification against the NCUA because officers or directors of a failed institution may not obtain indemnification for actions brought against them by the institution's receiver, regardless of whether they might have had a right to indemnification by the financial institution had it not failed."
The agency noted in the documents that because the defendants were responsible for purchasing an insurance policy on behalf of Wes Corp and elected to purchase the policy that they did, then the executives "are barred from pursuing a claim against WesCorp's successor the NCUA based upon any alleged inadequacy in the insurance policy so purchased."
It also said that--without conceding any act of the NCUA caused damages to the three--it is entitled to offset and recoup against any judgment that may be entered favoring the executives.
NCUA sued the WesCorp senior executives to try to recoup $6.8 million in investment portfolio losses from mortgage backed securities, alleging the executives were negligent in monitoring the corporate's investments. NCUA also alleged a breach of fiduciary duty and fraud related to the investments that contributed to WesCorp's collapse.
In addition to their defense costs, damages and other court costs, the WesCorp executives had demanded that NCUA indemnify them under Policy 21 adopted by WesCorp so current and former officials and employees could recover costs and attorney fees in case of a lawsuit.
NCUA said in the documents filed last week that it did not renew the policy when it expired.