Credit unions sue WesCorp, say negligence caused losses
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.
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.
