The NCUA served 18 former executives and directors of U.S. Central with demand letters, alleging their breach of fiduciary duty contributed to the conserved corporate's losses.
The move was necessary to meet the June 30 deadline to file a notice of claim with Travelers Casualty & Surety Co. to preserve the agency's right to full coverage provided under U.S. Central's directors and officers liability policy.
Does the NCUA, which served legal papers to sitting corporate executives and new CUNA CEO, Bill Cheney, intend to file suit against the high-profile volunteers? Director of Public and Congressional Affairs John McKechnie said NCUA's move was merely "a matter of protecting our position while we complete our investigation."
One attorney with 30-plus years experience representing credit unions, who asked to not be identified, called NCUA's action "entirely routine" and "a matter of paper pushing;" the source cited a hard deadline for filing claims after conservatorships as the motivator.
The NCUA did leave open the possibility for further legal action in a release, saying filing the claim notice was only a preliminary step, and it will "take the time necessary to complete its investigation and decide at a later date whether or not to initiate civil litigation against any individual directors or officers."
The NCUA's inspector general is required by law to conduct an independent material loss review as to the causes of losses at U.S. Central, and assess NCUA's supervision of the seized corporate. The Material Loss Review is currently in the field work stage, which involves gathering and analyzing data and information. A full report will be issued by the Inspector General when the review is complete.
In addition to Cheney, demand letters were sent to former U.S. Central executives and directors David W. Brehmer, Kathryn E. Brick, David A. Dickens, Larry D. Eisenhauer, Edward J. Fox III, John R. Franklin, Kathy L. Garner, James A. Hansen, Joseph P. Herbst, Roshara J. Holub, Francis Lee, Connie M. Loveless, Gregory S. Moore, Robert A. Siravo, Bradford L. Thomas, Charles E. Thomas and William A. Walby.
The $3 billion Corporate America Credit Union won the right to advance its securities fraud case against U.S. Central's former directors and executives, and a Dec. 6 trial date is scheduled in Birmingham, Ala. Corporate America alleges U.S. Central and its accounting firm intentionally hid losses from corporates when it solicited PIC II capital. That capital was wiped out mere weeks after the ink dried, and U.S. Central announced losses that required a $1 billion capital infusion from the NCUA.
Cheney and Siravo are also named in a negligence and breach of fiduciary duty suit filed by seven Western Corporate FCU members against former directors and executives of the $21 billion corporate, also under NCUA's control.