Brave WesCorp Plaintiffs Are Exercising Their Fiduciary Duties
In his letter to the editor (March 24 issue), SAFE Credit Union CEO Henry Wirz suggested that Glendale Area Schools FCU and six other credit unions had plenty of other options rather than to file suit against the WesCorp directors. With all due respect, Wirz is wrong. The plaintiff credit unions in the case are not as Wirz contends, "blaming others for a failure that no one saw coming." Anyone who had taken the time to read the complaint would understand that it is designed to hold accountable those responsible-an objective that many in the credit union industry share. The complaint will flush out the truth.
In his own corporate credit union regulation comment letter to the NCUA Board, Wirz called for a "truth commission." Although ferreting out the truth about the corporate mess is a shared objective, skeptics question whether any internal credit union industry truth panel could successfully get to that truth when required to wade through the historic good ol' boys club mentality that has delivered us to this tragic point in time. The courts are designed to objectively determine that truth.
In the lawsuit, the defendants include the directors, supervisory committee members, current and former WesCorp officers and employees, as well as the risk management firm RiskSpan that was bought and paid for by WesCorp to pass on its investment portfolio. Wirz contends that no one saw the problems coming. Oh, really?
I have reviewed the top 150 investment portfolios of natural person credit unions, and not a single one had reported losses for 2008 or 2009. All of them reported investment income from their portfolios. How could these natural person credit union directors, supervisory committee members, officers and employees get it 100% right when WesCorp got it 100% wrong? Market dislocation? How could these top 150 investment portfolios dodge the toxic waste and irresponsibly risky investments WesCorp was addicted to?
Who at WesCorp will accept responsibility for a doomed portfolio consisting of 80% mortgage-backed securities while the average corporate credit union was restrained at 37%? Who among the WesCorp directors voted for the $7 million CEO supplemental executive retirement plan? Let's make it perfectly clear, the lawsuit is about truth and social justice.
Wirz also worried that the WesCorp lawsuit would have unintended consequences like undermining officer indemnification. In reality, it was the indemnity agreements that gave those responsible a sense of liberty and license to act recklessly while knowing full well they could hide behind the almighty indemnity agreement. The indemnity agreement was not designed to protect the reckless while the rest of us picked up the enormous losses. The keystone of the credit union volunteer system does not rely on indemnification agreements but instead relies upon a moral compass of adherence to fiduciary duties. If WesCorp's volunteers comported their conduct in keeping with the top 150 investment portfolio credit unions, they would not need an indemnity agreement.
Wirz also claimed that the reasons for WesCorp's collapse came from outside of WesCorp. Regretfully, the collapse of WesCorp was due to the conduct of the defendants. The complaint is all about negligence and breach of fiduciary duties. Defending those responsible and diverting attention away from those responsible at WesCorp by accusing investment banks and mortgage brokers, among others, is misguided. No one held a gun to the heads of the WesCorp defendants demanding they purchase toxic waste investments. WesCorp bought toxic waste of their own free will.
We shouldn't blame the WesCorp defendants for being stuck on stupid. Just tell us who at WesCorp will accept responsibility?
The seven bold, brave and strong plaintiff credit union CEOs have taken a stand steadfast in exercising their fiduciary duties to act on behalf of their respective credit unions. It is a noble cause, a just cause and a righteous cause. Personal gain is not a factor. It is because we care about the credit union system that we proudly stand together on behalf of our members for the benefit of our members. It is our fiduciary duty to pursue the truth and social justice.
Glendale Area Schools FCU