California CUs Sue WesCorp FCU Management and Board

Credit Union Journal Daily Briefing  |  Tuesday, November 24, 2009

SAN DIMAS, Calif. — A group of seven large California credit unions plan to file suit this afternoon in state court against the former management and directors of WesCorp FCU over the failure of the one-time $32 billion corporate credit union.

The suit, the fourth in recent months over the troubles in the corporate network, will make a number of allegation related to the losses at WesCorp, which has wiped out more than $2 billion of capital for more than 2,000 member credit unions of the corporate.

Faced with billions of dollars of losses on mortgage-backed securities, WesCorp, along with U.S. Central FCU, was taken under conservatorship by NCUA on March 20, precipitating in creation of a special federally-backed fund to finance the bailout of the corporates. The fund, the Corporate Stabilization Fund, will absorb and pass on as much as $7 billion of losses in the corporate system to natural person credit unions over the next seven years by way of special assessments.

Among those named as defendants in today’s suit are: Robert Siravo, the former president and CEO of WesCorp., Robert Harvey, the former chairman of the board, Gordon Dames, a director and Bill Cheney, president of the California CU League, who also sat on the board of U.S. Central.

In recent months Cheney, in his role as U.S. Central director, was also sued by Corporate America CU, along with other directors and managers of U.S. Central. There have also been suits filed recently against Members United Corporate FCU.