Former directors of WesCorp Federal Credit Union on Tuesday urged a federal court to dismiss a civil suit brought against them by NCUA, saying federal regulators were well aware of what the $34 billion-asset corporate CU was up to with its MBS purchases.
"The NCUA knew then what Defendants were doing and how they were doing it," said the directors in their court brief. "It therefore has no business suing them now for billions of dollars on account of business decisions that the NCUA's statutes and regulations and its examiners permitted – and indeed applauded – at the time."
The directors assert that at the time the Los Angeles-based WesCorp was investing in risky mortgage-backed securities, "NCUA gave WesCorp the highest level of expanded investment authority, including permission to buy securities rated as low as BBB, and that the NCUA therefore subjected WesCorp to the very highest level of regulatory scrutiny including on-site NCUA examiners who had real-time access to all (asset liability management reports) and Board reports, and daily access to WesCorp personnel."
"When big losses occur, there is an all-too-human desire to find scapegoats," stated the directors. "Doubtlessly WesCorp made some investment decisions that, with 20/20 hindsight and full knowledge of the credit crisis of 2008-09, one might wish it had not made. But it is one thing to regret an investment and quite another to ask a group of unpaid volunteer directors to ante up $6.8 billion in damages for having made, in perfect good faith, some investment decisions that did not work out as one might have hoped."
The motion for summary judgment to dismiss the charges against the directors comes in response to an NCUA September 1 amended complaint charging the directors and top executives of the failed corporate CU with breach of fiduciary duty and gross negligence in overseeing the demise of the corporate giant. (NCUA stands for National Credit Union Administration.)
WesCorp's failure is projected to cost as much as $7 billion.
