Not so fast when it comes to dismissing complaints against Western Corporate Federal Credit Union's outside directors--that is the gist of yesterday's filing by NCUA in the continuing case of NCUA v. Siravo, et. al.
In late December presiding Judge George Wu had, in a draft decision, indicated his intention to dismiss complaints against WesCorp's outside directors, including CUNA head Bill Cheney. The judge appeared to root his decision in the facts that the outside directors were not compensated for their service and did not personally profit.
NCUA, in its 20 page filing, claims the outside directors ignored red flags, breached their duties, and did not adequately perform their jobs.
Specifically, NCUA alleges, "In these acts and omissions, the Director Defendants abdicated their responsibilities as directors and failed to perform their duties with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use as a director of a $30 billion corporate credit union."
Central to the NCUA argument is that precisely because of their positions in the credit union industry, the outside directors ought to have known better.
The NCUA filing states: "The NCUA respectfully submits that it has stated a claim against the Director Defendants that is not barred as a matter of law by the business judgment rule."