The nation’s credit union regulator is attempting to oust plaintiffs in a lawsuit against a failed corporate credit union and take the lead in the litigation as the new plaintiff.
The National Credit Union Administration said yesterday that it has made a filing in Los Angeles Superior Court to replace seven credit unions as plaintiff in a lawsuit against 25 current and former employees and officials of Western Corporate Federal Credit Union. The San Dimas, Calif., institution was placed in conservatorship by the NCUA during March.
The complaint alleges negligence and breach of fiduciary duties by the defendants with WesCorp’s substantial investments in residential mortgage-backed securities and collateralized-debt obligations.
The regulator claims it is the proper plaintiff, and it should be able to determine the legal strategy against former WesCorp board members and employees. The credit unions that filed the lawsuit would have an advantage over other credit unions who are also members of WesCorp but haven’t yet pursued litigation.
The NCUA is analyzing whether legal action is appropriate against some of the defendants, including former WesCorp officials.
“As conservator, the NCUA operates the institution through its management team and is the successor to all the rights titles, powers and privileges of the credit union and any of its members, accountholders, officers or directors,” the statement said. “NCUA concluded it had an obligation to intervene on behalf of all members of WesCorp.”
