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News Now

CU System
WesCorp plaintiffs oppose NCUA substitution as plaintiff
SHERMAN OAKS, Calif. (6/28/10)--Seven credit unions who sued Western Corporate FCU's (WesCorp) former and current directors and officers for investments losses that resulted in the corporate credit union's conservatorship filed papers Monday opposing a motion by the National Credit Union Administration (NCUA) to substitute itself as the sole plaintiff in the case. Their motion was filed in the U.S. District Court for the Central District of California. It argued that NCUA "is hopelessly conflicted regarding the failure of WesCorp and cannot be expected to diligently prosecute all claims that may belong to WesCorp." It asks that NCUA's intervener's motion to substitute be denied and that the court find that plaintiffs continue to have standing to continue to prosecute their claims. The motion said NCUA "is not the only party that may assert derivative claims against defendants" and alleges WesCorp defendants "breached duties owed directly to plaintiffs--not just duties owed to WesCorp. As a result of those breaches, plaintiffs suffered injuries that are distinct from the harm that defendants also inflicted on WesCorp. Only plaintiffs, and not the NCUA, have standing to assert those direct claims. As a result, the NCUA is not the real party in interested with respect to those claims." Late last year NCUA moved to intervene as a plaintiff in the lawsuit brought by the credit unions, which are members of WesCorp. The Los Angeles Superior Court granted NCUA's motion to intervene as a party on Feb. 24 but did not rule regarding whether NCUA should replace the credit unions as the plaintiff. On March 5, NCUA filed a notice of removal with that court and succeeded in moving the case from state court to federal court (News Now Dec. 31 and March 11). The seven credit union plaintiffs include: 1st Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU and Tulare County FCU. Their civil action alleges negligence and breach of fiduciary duties in connection with WesCorp's substantial investments in residential mortgage-backed securities and collateralized debt obligations.


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