Press
Louisiana Corporate Receives Sizable Amount in Substantial Credit Suisse Settlement; Recovery Exceeds Half-Million Dollars
METAIRIE, LA (April 9, 2013) – Louisiana Corporate Credit Union has agreed to a settlement with Credit Suisse – the last remaining defendant in the National Century Financial Enterprises asset-backed securities fraud case. In two separate civil actions filed in 2002 against a number of defendants, LaCorp engaged in a more than decade-long court case, vowing to regain members’ funds to the greatest extent possible.
“This settlement for nearly $600,000 after legal fees came after years of strenuous litigation and brings the total recovery to 98 percent of Louisiana Corporate’s original investment amount,” said David Savoie, President/CEO of the Corporate Credit Union. Savoie said the contingent legal fees totaled 10 percent – a much lower contingent rate than seen on recent settlements of asset-backed securities.
“We filed our actions promptly – within a few months of the losses – and pursued them vigorously. I’m delighted with this outcome because our member credit unions are the ultimate beneficiaries,” he said.
LaCorp’s attorneys and CPA firm had estimated that at least 80 percent of the fraud losses would be recouped through National Century’s liquidation; however, the Corporate had been required to write down 80 percent of the bond as other than temporary impairment (OTTI). Nonetheless, by following GAAP, recoveries of previous write-downs have been recorded as a credit to income and used to bolster LaCorp’s retained earnings.
“Our efforts have resulted in a stronger Corporate for our members,” Savoie said. “Our board’s philosophy has always been that investment losses, like loan losses at natural-person credit unions, should not be shrugged off as ‘water under the bridge’; we decided to make every reasonable effort to recover the funds if competent legal and accounting professionals believed it to be feasible.”
Other plaintiffs joining in the suit and sharing in the settlement include PIMCO, Dreyfus Mutual Funds, Wachovia and numerous Arizona municipal entities.
Savoie and the LaCorp Board worked closely with their legal counsel, R. Patrick Vance, Partner with the New Orleans law firm of Jones Walker. Vance provided invaluable advice regarding ABS litigation and how OTTI estimates are often assumed to be more reliable than warranted.
“OTTI ‘estimates’ are produced in a highly complex and technical manner,” said Vance, who leads Jones Walkers’ Business & Commercial Litigation Practice Group “Like all estimates, they are predictions of the future and can vary widely. Based on the current method/protocol for determining OTTI, they may prove to be overstated when all the chips have fallen.”
In LaCorp’s case, initial OTTI mandates of 80 percent were off by 78 percent.
Savoie says he is gratified by the result. “While it was a long time coming, the Corporate and our legal counsel steadfastly pursued this matter, and our members enjoy an even stronger institution as a result,” he said.
About Louisiana Corporate Credit Union
Louisiana Corporate offers a wide range of investment, liquidity, and correspondent financial services. Located in Metairie, La., LaCorp serves the investment, correspondent, and liquidity needs of more than 100 credit unions. The Corporate was founded in 1984, and is a service oriented financial partner for credit unions in Louisiana and other surrounding areas. For more information, visit www.lacorp.com.