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WesCorp directors file response to NCUA claims
LOS ANGELES (12/8/10)--Former Western Corporate FCU directors filed briefs in support of their motion to dismiss a lawsuit brought by the National Credit Union Administration (NCUA) related to decisions made prior to WesCorp's conservatorship. The briefs were filed Monday in the U.S. District Court, Central District of California, Los Angeles, in reply to NCUA's opposition filed Nov. 22 to the dismissal motions, which the former directors originally filed on Nov. 1. NCUA's suit, which seeks $6.8 billion in damages, alleges that WesCorp officers and volunteer directors breached fiduciary duties and engaged in "gross negligence" in their investment decisions before the recession. The case hinges on the way the court will treat the "Business Judgment Rule," which immunizes directors from personal liability if they follow the rule's requirements and insulates from court intervention management decisions made in good faith in what is believed to be the organization's best interest. According to the former WesCorp directors' brief, the business judgment rule "means that before a plaintiff can seek billions of dollars of damages from unpaid volunteer directors unsullied by any conflicts of interest or ulterior motives, the plaintiff must make cogent factual allegations strongly suggesting that the directors blinded themselves to reality, acted in bad faith or lacked any rational business purpose." NCUA's complaint "does not do that here," noted the brief. According to the opposition briefs filed by NCUA on Nov. 22, however, it is the agency's view that--at least with respect to WesCorp--the business judgment rule "does not eliminate directors' liability for breach of the duty of care." NCUA's complaint also alleges fraud as well as breach of fiduciary duty against Robert A. Siravo, WesCorp president/CEO from May 22, 2009, to March 20, 2009, and another officer related to executive compensation. The complaint alleged that Siravo and the other officer manipulated the board into approving more executive compensation than the board thought it was approving. NCUA is pursuing a third former officer for alleged unjust enrichment also related to executive compensation. WesCorp was placed into conservatorship on March 19, 2009, after it was required to recognize losses of $6.8 billion.


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