NCUA Levels Fraud Charges in Amended WesCorp Suit
The NCUA Board, serving as conservator plaintiffs in the Western Corporate FCU lawsuit, filed an amended complaint Aug. 31 in Los Angeles U.S. District Court that added charges and defendants to those originally filed by seven natural person credit union members last year.
New allegations were made against former WesCorp President/CEO Robert Siravo and Vice President of Strategic Planning and Organizational Development Tom Swedberg, accusing the two of fraud when they increased their Supplemental Executive Retirement Plan payouts.
NCUA alleged the defendants failed to impose prudent concentration limits on private label mortgage-backed securities, particularly Option ARMs, which accounted for 68% of WesCorp's $7 billion in investment losses. NCUA seeks damages from the above defendants in excess of $1 billion.
The suit describes significant changes to WesCorp's business model, aggressively increasing net interest income, operating expenses, assets and borrowings, leveraging borrowings to purchase increasing concentrations of non-agency MBS. Borrowings increased from $420 million to $1.28 billion during Siravo's first two years.
CUNA President/CEO Bill Cheney, a defendant named in the suit, said he was "disappointed" the NCUA chose to pursue the claims against him. "I completed my board service in February 2006, before the securities that caused the majority of losses at WesCorp were purchased in a period when NCUA had an examiner on-site at WesCorp," Cheney said in a statement.
Cheney joined WesCorp's board of directors in May 2002, and was a member of the asset/liability committee from June 2002 to November 2005.