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Nov. 28, 2009
Copyright © Las Vegas Review-Journal

Credit unions sue WesCorp, say negligence caused losses

By JOHN G. EDWARDS
LAS VEGAS REVIEW-JOURNAL

Seven credit unions are suing directors and officers of Western Corporate Federal Credit Union, seeking damages for millions of dollars lost when the San Dimas, Calif.-based institution was put in conservatorship.

Sue Longson, chief executive officer at Sonepco Federal Credit Union of Las Vegas, is among the former WesCorp directors named as a defendant. Attempts to reach Longson for comment Friday were unsuccessful.

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    • WesCorp provided credit unions with processing for checks, credit cards and automated teller machines, as well as access to cash for liquidity.

    However, WesCorp changed its investment focus in 2003, according to the lawsuit filed in Los Angeles Superior Court on Tuesday. WesCorp borrowed up to $10 billion in short-term funds and used the money to invest in allegedly risky, long-term mortgage backed securities, according to the lawsuit.

    By January 2008, WesCorp "essentially became insolvent" but continued operations with emergency funding from the national credit union agency. In March 2009, the federal agency put WesCorp in conservatorship.

    Credit unions held ownership stakes in WesCorp. Those investments were wiped out in March when the National Credit Union Administration seized WesCorp.

    Silver State Schools Credit Union of Las Vegas is not a plaintiff in the lawsuit, but it earlier planned to charge off $3 million because of losses at WesCorp. Other Nevada credit unions also lost money with the collapse of WesCorp.

    Cascade Federal Credit Union of Kent, Wash., lost $1.8 million, and Glendale Area Schools Federal Credit Union of Los Angeles lost $1.2 million, according to the lawsuit.

    The lawsuit accuses WesCorp officers and directors of negligence and of breaching their fiduciary duties. It seeks a judgment for damages to the plaintiffs.

    Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.

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    jm0405 wrote on November 28, 2009 06:56 PM: Funny thing - Zion Bancorp has its hand in the Vegas credit unions since it's all Mormon owned. Read The Salt Lake Tribune and get the rest of the credit union stories.


    Too_many_scammers wrote on November 28, 2009 01:30 PM: The credit union story keeps getting better.


    Jeff Schroth wrote on November 28, 2009 12:28 PM: I'm not sure which is more confusing: suing the VOLUNTEER directors of an INSOLVENT organization, or BEING a volunteer director in the cooperative credit union movement yourself and AUTHORIZING such the suit!

    I may be wrong, but the ol' saying about how pointing a blaming finger means they have one finger aimed at WesCorp but FOUR fingers aimed at themselves seems somehow highly appropriate.

    At no time were the decisions of the management at WesCorp (as authorized and approved by their volunteer board) unknown or undisclosed to their Member credit unions. Clearly, then, the suing credit unions had (or SHOULD have had!) knowledge of those decisions and determined (or SHOULD have determined!) not to withdraw their funds or their Membership in the organization.

    In fact, there is a pretty high percentage chance that they actually APPRECIATED the decisions they now damn, since it meant a higher rate of return on their deposits and investments at WesCorp (returns they needed since THEIR Members - everyday working folks - were demanding higher returns, too.)

    For those of us who know that the co-operative model can be a big part of the solution to this country's current economic issues, this absurd suit is at best a disingenuous distraction, and at worst... a plain ol' money-grab, perhaps?