NCUA Files New WesCorp Charges
It's not over until it's over. Call that the top-line of the NCUA's Jan. 10 filing of an "offer of additional allegations" in the case of NCUA vs. Siravo, et al., where the fight is over who is at fault for the implosion of Western Corporate Federal Credit Union and who will be held accountable for the losses.
That had seemed settled in late December when presiding Judge George Wu issued a draft decision that dismissed charges against WesCorp's outside directors. Wu's ruling allowed charges to proceed against WesCorp's officers-Robert A. Siravo (WesCorp's former president/CEO), Todd M. Lane (former chief financial officer) and Thomas E. Swedberg (former vice president). In the same preliminary opinion, Judge Wu dismissed complaints against WesCorp's former executive vice president Robert Burrell.
Central to the NCUA argument is that outside directors in 2005 through 2006 ignored red flags as WesCorp sharply increased the risk of its mortgage-backed securities investments in order to hit desired income targets, which had gotten more difficult to attain as returns on higher quality investments were shrinking. Thus, in 2005, per the NCUA, "WesCorp...increased the risk in its portfolio by purchasing lower tranche MBS, which would absorb any losses in the mortgage pools before the higher tranches and so had a higher risk and paid a higher yield."
Those investment decisions, argues the NCUA, ought to have prompted the board to inquire into material risks associated with the change in WesCorp investment strategies. That discussion never happened, said the NCUA, and this constitutes a "breach of duty," the NCUA maintains.