NCUA to File Amended Complaint Against WesCorp Directors
In a complicated ruling last week, Judge George Wu opened a door that had seemed closed, by agreeing to allow cases against WesCorp's outside directors to proceed. That decision is a reversal of a draft ruling circulated by the judge in late December in which he proposed dismissing all charges against the outside directors.
The NCUA had filed in opposition to that draft ruling, offering extensive argument that the outside directors in fact had culpability in the losses incurred by WesCorp.
In the ruling, the judge concluded that "the end result might very well be the same" after "a new round of motion to dismiss briefing." That is, the charges may still be dismissed after the NCUA amends its filings. But, for now, and despite signaling skepticism that the NCUA argument will prevail, Judge Wu agreed that the defendants will get the day in court that the plaintiff has asked for.
An observer explained that in essence the judge said that it was not impossible an amended NCUA filing would prevail and, therefore, he decided it was legally prudent to give the NCUA that opportunity. "Judge Wu is a legal artist, very deliberate," said the observer.
Wu, this observer said, indicated he doubted the NCUA would prevail, but its argument had enough merit to warrant going to the next step.
At the NCUA, Director of Public and Congressional Affairs John McKechnie said "the court ruled that NCUA has until Feb. 22 to file an amended complaint on the breach of fiduciary duty suit NCUA brought against WesCorp directors. NCUA intends to file an amended complaint by the deadline. The new amended complaint will continue to allow NCUA to seek compensation for the losses stemming from WesCorp."
Experts anticipate that the amended NCUA filing will offer more details regarding the alleged wrongdoing by the outside directors.
At least some credit union leaders applaud the judge's decision. Said Stuart Perlitsh, CEO of Glendale Area Schools Federal Credit Union, "the defendants need to have their day in court, that's what transparency is about." Perlitsh's credit union was in the original group of seven that filed against WesCorp, a case in which the NCUA eventually intervened. "This case should proceed if only to put all directors on notice," Perlitsh added.