Officers and volunteers named as defendants in a suit charging negligence and fiduciary breach began to change Western Corporate Federal Credit Union's investment focus in or around 2003, when they invested in more mortgage and asset backed securities, plaintiffs claim.
That strategy shift put WesCorp "on a course that focused far more on obtaining higher rates of return on principal than on the preservation and return of the principal itself," say the seven mid-sized credit unions who sued 25 current and former WesCorp officers and volunteers yesterday in Los Angeles Superior Court.
Defendants strayed from WesCorp's mission when they borrowed up to $10 billion "from non-member sources" in short-term instruments with maturities of 90 days or less. Those funds were then invested into longer term, risky mortgage backed securities in an attempt to maximize revenue "at the risk of safety, liquidity, appropriate risk management and common prudence," court documents state.
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