NCUA Seeks to Replace Plaintiffs in Lawsuit
Citing a need to represent all members of the San Dimas, Calif.-based Western Corporate Federal Credit Union (WesCorp) appropriately, the National Credit Union Administration (NCUA) petitioned the Superior Court in Los Angeles to be named sole plaintiff of a lawsuit against WesCorp board members, according to a press statement. The lawsuit was initially filed last year after losses sustained from WesCorp's investment in residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDO) caused the credit union to fail. The original plaintiffs allege the failure was due to negligence and breach of fiduciary duties on the part of the WesCorp board and certain employees. The credit union administration's counsel says that, as it currently stands, the lawsuit may not provide fair representation, as not all members of WesCorp are named as plaintiffs. “Federal law provides that NCUA as conservator is the appropriate party to represent the interests of all members in connection with any recovery attempts,” said NCUA general counsel Bob Fenner. “While we did not choose to initiate this litigation, we believe NCUA has an obligation to intervene because claims of this nature belong to all of WesCorp’s members, not just the first plaintiffs to arrive at the courthouse,” Fenner added. The NCUA assumed conservatorship of WesCorp in March 2009. WesCorp is a corporate credit union that provides liquidity to more than 1,000 credit unions in the western US. These credit unions customers, called natural person credit unions, are owners in the entity. This is similar to individuals with credit union accounts that hold ownership stakes in their credit unions. After the conservatorship, seven of WesCorp’s natural person credit union members filed the lawsuit against WesCorp board members and employees. Last week, the NCUA filed the motion seeking to be named sole plaintiff in that case. The NCUA argued it and should be permitted to replace the current plaintiffs and determine whether and how to proceed with any action against WesCorp’s former Board members and employees. The NCUA is an independent federal agency that regulates the credit union industry similar to the role the Federal Deposit Insurance Corp. (FDIC) serves with banks. It operates the National Credit Union Share Insurance Fund, which insures credit union accounts. As conservator, the NCUA operates WesCorp through its management team and is the successor to all the rights titles, powers and privileges of the credit union and any of its members, accountholders, officers or directors, the agency said. Write to Austin Kilgore.