Seven CUs Sue Former Directors and Officers of WesCorp (Updated)

The Las Vegas Review Journal is reporting that 7 credit unions are suing directors and officers of Western Corporate Federal Credit Union, seeking damages for millions of dollars lost when the institution was put in conservatorship.

The lawsuit filed in Los Angeles Superior Court on Tuesday, November 24 alleges that WesCorp changed its investment focus in 2003 by borrowing up to $10 billion in short-term funds and using the proceeds to invest in risky, long-term mortgage backed securities.

By January 2008, WesCorp was essentially insolvent but continued to operate with emergency support from the National Credit Union Administration. In March 2009, WesCorp was placed into conservatorship, wiping out the ownership stake of credit unions that invested in WesCorp.

The lawsuit accuses WesCorp officers and directors of negligence and breach of their fiduciary duties. The plaintiffs are seeking a judgment for damages.

The seven plaintiff credit unions and their stated losses are as follows:

Cascade FCU, with a loss of more than $1.8 million;

Glendale Area Schools FCU, with a loss of more than $1.2 million;

KaiPerm Northwest FCU, with a loss of $51,374;

1st Valley CU, with a loss of $163,395;

Northwest Plus CU, with a loss of $549,327;

Stamford FCU, with a loss of $189,096; and

Tulare County FCU, with a loss of $212,922.