WesCorp’s Lane Demands Reimbursement and Trial
Former WesCorp Chief Financial Officer Todd Lane and his legal team have asked U.S. District Judge George Wu’s Los Angeles federal court to drop WestCorp's case against him, pay his legal fees and award him damages, according to legal documents filed Apr. 4. Lane also demanded a jury trial.
He made the requests in an amended counterclaim to an amended complaint by the NCUA in the case arising from WesCorp’s 2009 failure, which was caused by investment losses that are responsible for the majority of corporate assessments credit unions now pay to the NCUSIF.
In mid-March, Wu ruled that Lane and his co-defendants–former CEO Robert Siravo, Chief Investment Officer Robert Burrell, Human Resources Director Thomas Swedberg and Chief Risk Officer Timothy Sidley–should be treated as WesCorp creditors and must submit claims for payment to the NCUA only after their case with the agency is completed.
In Lane’s counterclaim, he argued that WesCorp, and subsequently the NCUA as the failed corporate’s liquidator, are responsible for his more than $100,000 in legal fees and damages that have occurred by its failure to pay them.
Per WesCorp Policy 21, the corporate had agreed to indemnify current and former officials and employees “to the maximum extent permitted by either the laws of the state of California or the Model Business Corporation Act for any liability asserted against them in connection with judicial or administrative proceedings, formal or informal,” the court documents state. WesCorp’s Policy 21 also promised to recover reasonable attorney’s fees and purchase and maintain insurance as protection against “any liability asserted against them and expenses reasonably incurred by them in their official capacities and arising out of the performance of their official duties.”
Because WesCorp’s CUMIS policy did not cover Lane for “any liability” as promised by Policy 21, WesCorp breached its promise. Further, when the NCUA canceled the CUMIS policy after placing WesCorp into conservatorship, the regulator “compounded the damage done to Lane.”
Lane submitted requests in January, February and March of 2011 to the NCUA for defense cost reimbursement, an advance on future defense costs, and costs associated with his efforts to be granted indemnification. The NCUA did not respond within 180 days, and therefore denied the claims.
In addition, Lane argued that California law indemnifies him as an officer of the corporation. Lane’s attorneys cited California Labor Code 7237, which provides that an officer of a corporation should be indemnified against expenses if successful on the merits in defense of any proceeding brought by or in the right of the corporation. Further, the California code provides that the officer may be indemnified “even if he or she has been adjudged to be liable.”
Because the NCUA previously agreed to dismiss a claim against Lane, he succeeded on the claim’s merits, and therefore is entitled to be reimbursed for costs incurred defending that claim, the counterclaim stated.
The NCUA settled with Sidley and Burrell last month. Sidley’s settlement said each side would bear their own legal costs and he was hit with a prohibition order from the NCUA, banning him from again working for a federally insured credit union.
Lane’s demand for a trial is not surprising. A prohibition order would be damaging to Lane’s career. According to his LinkedIn profile, Lane has worked exclusively within the credit union industry for 26 years. He currently serves as chief financial officer at $1.6 billion California Coast CU in San Diego, Calif.
In July, Judge Wu dismissed charges against WesCorp volunteers, but denied motions to dismiss all charges against Lane and the remaining officer defendants.