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News Now

CU System
WesCorp directors file response in NCUA amended complaint
LOS ANGELES (1/26/11)--Former directors of Western Corporate FCU (WesCorp) Monday filed a response arguing that the National Credit Union Administration's (NCUA) amended complaint in its lawsuit against them "raises nothing new" to the case and fails to meet a key standard set by the court. The directors filed the response Monday to the amended complaint filed earlier this month in NCUA's $6.8 billion lawsuit in a U.S. District Court in Los Angeles. In addition to raising "nothing new," the response said, NCUA's amended offer fails to meet the standards for overcoming the business judgment rule articulated by U.S. District Judge George Wu in his temporary decision in December, which favored the directors. That decision dismissed NCUA's complaints of breach of fiduciary duty and gross negligence against the directors as "glaringly absent" from NCUA's allegations. However, it was not final because Wu also allowed NCUA one more chance to amend its complaint and proffer what it would argue, if given the chance to do so (News Now Dec. 28). In the tentative decision, Wu said the directors fall under the Business Judgment Rule in decisions that do not involve fraud or breach of trust. The rule provides directors "broad discretion in making corporate decisions and [allows] these decisions to be made without judicial second-guessing in hindsight," he wrote. NCUA's amended offer, filed Jan. 10, proposed allegations in three categories related to WesCorp's budget and interest-rate spreads; concentration limits and Option Adjustable Rate Mortgages (ARMs); and damages. "None [of the allegations] adds any substance," said the directors' response. "The offer's legal discussion is a (barely) disguised motion for reconsideration that fails to comply with the local rules. It raises nothing new, and the points it makes remain demonstrably wrong," the court document said. "The court has been liberal with the NCUA by giving it this opportunity to make a written offer of proposed allegations. But that policy has its limits," said the directors' response. "It is one thing to treat liberally a private plaintiff who has been forced to plead a claim against corporations or their directors without any access to the corporation's records. But it is another thing to extend the same liberality to a government agency that has controlled WesCorp for the last year and a half, with complete access to all its books and records." The directors are seeking dismissal of the case without leave to amend. The next hearing in the case is Jan. 31.


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