WesCorp Board Cedes to Conservatorship
The decision against a legal challenge of the March 20 conservatorship came down to poor odds and fiduciary responsibility, according to former WesCorp Board Chair Bob Harvey.
The five board members met four times and received counsel from several law firms. All shared the same opinion: no financial institution has ever successfully contested a conservatorship.
The loss of capital smarts for WesCorp members, but a lawsuit would smart even worse, Harvey said, because credit unions would pay the legal bills for both sides regardless of the outcome. As conservator, the NCUA provides the former board with the right to contest the action, which includes covering those costs. The NCUA would also be financially responsible for its own legal defense. Federally insured credit unions fund the agency's budget.
"The real issue is, we would not be justified in extending a huge expense when we have no hope of winning; it's just not right," Harvey said. "In making the decision as the former board, our fiduciary responsibility still remains. We must be prudent."
Harvey said the NCUA's actions caught him by surprise, saying he learned the news exactly one minute after NCUA officials arrived at WesCorp to act on the conservatorship.
"The phone call came to me first, and I was told to inform the other board members," he said.
He said the WesCorp Board had met via teleconference the morning of March 20 with dismissed President/CEO Bob Siravo and top managers to discuss releasing 2008 year-end financials to the press.
"I had called for an in-person board meeting, which took place in the evening on Monday the 16," Harvey said. "We were able to review financial statements, which had been prepared by staff and had been reviewed thoroughly, and were prepared to release them on Friday. However, mid-week we heard there might be changes to WesCorp's financials due to accounting rules, so we decided that Friday morning to release them a little later."