LOS ANGELES – A federal judge issued a final order yesterday dismissing negligence charges against directors of WesCorp FCU but ruled that top executives of the one-time $34 billion corporate credit union must still face charges in a civil suit brought by NCUA claiming that their recklessness caused the huge corporate to fail.
The order by Judge George Wu gives NCUA some measure of victory but is fraught with potential for embarrassment as a public hearing on the causes of the WesCorp failure is bound to raise questions of what NCUA knew and when–especially since the federal regulator had an on-site examiner at both WesCorp and at U.S. Central FCU five days a week while two corporate giants slid into oblivion.
The Judge’s order means that WesCorp CEO Robert Siravo, its Chief Financial Officer Todd Lane, Chief Investment Officer Robert Burrell and Chief Risk Officer Timothy Sidley will face civil charges of breach of fiduciary duty and gross negligence in allowing WesCorp to load up on risky mortgage-backed securities–that at one time amounted to 70% of its investments–before its monumental collapse in March 2009.
At that point, NCUA took over both WesCorp and U.S. Central, with losses for the two biggest corporates projected to exceed $12 billion.
Siravo, Lane and Thomas Swedberg, who was vice president of human resources, must also face NCUA charges of unjust enrichment for allegedly manipulating the corporate’s executive compensation plan for their own benefit.
Yesterday’s order formalized the Judge’s decision to dismiss negligence charges against 11 directors of WesCorp, all prominent figures in the credit union movement.