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Court backs WesCorp directors; officers at issue
A federal district court last week issued a tentative ruling dismissing NCUA's claims that Western Corporate FCU's board directors breached their fiduciary duty and that they committed "gross negligence" in connection with investment decisions that led to WesCorp's losses and eventual conservatorship.
The defendants had argued that California state law regarding a director's business judgment applies and that it focuses on process, not specific decisions. The issue would be whether the directors acted in bad faith or had a conflict of interest; neither was asserted by NCUA. They also noted that state law makes no claim of gross negligence available but that, even if one was, NCUA failed to delineate in its suit facts that would support it.
The court agreed and said these two claims should be dismissed with respect to the board directors, but it says NCUA may amend the first claim, under the business judgment rule, with respect to Robert Burrell, then-executive vide president and chief investment officer for WesCorp; Bob Siravo, its former chief executive officer; and Todd Lane, former chief financial officer.
The court also did not dismiss claims against Siravo and Thomas Swedberg, who had served as the corporate's vice president of human resources, of misrepresentation regarding payment to Siravo by the corporate's supplemental executive retention plan.
NCUA has until Jan. 10 to file an amended complaint regarding Burrell, Siravo and Lane. The three will have until Jan. 24 to file their reply. The court has reset a scheduling conference in this suit for Jan. 31.
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