A dozen former directors of Western Corporate Federal Credit Union, facing allegations in a billion-dollar lawsuit brought by federal regulators, can breathe a little easier.
In a tentative ruling, U.S. District Court Judge George Wu recently found that most of the former directors acted appropriately under the so-called “business judgment” rule, a decision that could pave the way for them to be dropped from the lawsuit. However, certain allegations against former officers of the credit union may go forward.
WesCorp, as it was known, was closed by regulators in March 2009 after losing nearly $7 billion on investments in mortgage-backed securities. As a corporate credit union, the San Dimas-based entity was tasked with providing liquidity to and investing the extra cash of its retail credit union members.
The National Credit Union Administration, the federal regulator overseeing the industry, recently filed a lawsuit against 16 former officers and directors seeking more than $1 billion for allegedly investing irresponsibly and failing to recognize the risk that resulted in massive losses to the institution and industry.
In the ruling, Wu found that the directors “acted reasonably at the time they engaged in the challenged decisions and are therefore entitled to a business judgment rule-based dismissal of this claim.” Among those affected by the decision are former director Bill Cheney, the current head of Credit Union National Association, the industry’s Washington, D.C.-based trade group.
However, similar claims against former executives, including former Chief Executive Robert Siravo, were not dismissed.
Lawyers for the defendants declined to comment.
In his ruling, however, Wu left room for the NCUA to amend the lawsuit in the case of one director who also served as an officer. The NCUA can also update the allegations against other former executives.
“(Wu has) given us the opportunity to add additional material to the record and that’s what we’re going to do,” said John McKechnie, a spokesman for the NCUA.
A hearing is scheduled for Jan. 31 to decide whether all the allegations against the directors will be dismissed.
Gay Practice
Wealth management firm Northern Trust Corp. announced last week the launch of a division that will serve gay and lesbian clients, becoming one of the first major firms with a dedicated practice.
The Lesbian, Gay, Bisexual, Transgender and Non-Traditional Family Practice will help clients navigate the complex laws regarding financial and estate planning for nonmarried same-sex couples. John McGowan, national practice leader for the division, said increasingly vocal clients spurred the creation of the practice.
“We did have clients starting to give us a call beginning about two years ago,” he said. “We were having same-sex couples who were very open and out, and were very concerned about their estate planning and financial planning.”
Most firms serve gay and lesbian clients, and some have specialists in that area, but few have entire divisions, McGowan said.
While Chicago-based Northern Trust will train employees nationwide, McGowan said Los Angeles will be a key market because “there is a very significant gay population there and there is significant wealth in that community.”
Capital Concerns
Regulators have ordered Pan American Bank, a community institution in East Los Angeles, to develop a plan to keep its dwindling capital above required regulatory minimums.
The Federal Deposit Insurance Corp. recently announced that it has entered into a consent order with the bank directing executives to submit a plan to raise new capital or sell the bank to another institution.
As of Sept. 30, Pan American’s capital exceeded required levels, but it has been falling amid increasing losses on loans to multifamily residential properties. In a recent interview, Chief Executive Jesse Torres said the bank is exploring options to raise as much as $6 million in new capital, including an unusual plan to issue stock to local youths.
C-Suite News
Julia Gouw, chief operating officer of East West Bancorp Inc. in Pasadena, was elected to the boards of Pacific Mutual Holding Co. and Pacific LifeCorp, the parent companies of Pacific Life Insurance Co. … El Segundo private equity firm Lovell Minnick Partners LLC announced that John Cochran was named managing director. … Nara Bancorp Inc., the Koreatown holding company for Nara Bank, has hired Philip Guldeman as executive vice president and chief financial officer. … U.S. Trust, a unit of Bank of America Corp.’s wealth management division, announced that Barbara Bagley was appointed senior vice president and portfolio manager in the firm’s Century City office. … Manhattan Bancorp, the El Segundo holding company for Bank of Manhattan, announced that it has increased the size of its board from 10 members to 11 and appointed Greg Jacobson to the new position.
Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.
