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News Now

Washington
NCUA request to move WesCorp case to fed court granted
ALEXANDRIA, Va. (3/11/10)--The National Credit Union Administration (NCUA) has transferred a lawsuit against Western Corporate (WesCorp) FCU's former directors and current and former officers from the Los Angeles Circuit Court, a state court, to the U.S. District Court for the Central District of California. The NCUA in late 2009 moved to intervene as plaintiff in a lawsuit that seven natural person credit unions that are members of WesCorp brought against several current and former employees and officials of WesCorp. The Los Angeles Superior Court granted NCUA's motion to intervene on Feb. 24. NCUA filed a notice of removal with that court on March 5, an action that automatically removed the case from state to federal court. The NCUA claimed that it was rightfully intervening in the case as a substitute plaintiff, because it had served as conservator for WesCorp since March and was the "successor to all the rights, titles, powers and privileges of the credit union and any of its members, accountholders, officers or directors" pursuant to Section 207 of the Federal Credit Union Act. Based on the language of Section 207, the NCUA has asked the court for a declaratory judgment that it is the sole proper plaintiff in this matter. In the suit, the credit unions--which include 1st Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU and Tulare County FCU--have alleged negligence and breach of fiduciary duties in connection with WesCorp's substantial investments in residential mortgage-backed securities and collateralized debt obligations. WesCorp was taken over by the NCUA in early 2009 after mortgage-backed securities that were held in its portfolio decreased due to the recession and plummeting home values across the nation. WesCorp late last year reported $1.2 billion in total Other Than Temporary Impairment (OTTI) losses for 2009, bringing its total OTTI losses for 2008 and 2009 to $6.8 billion.


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