Lawyers for National Credit Union Administration (NCUA) asked a federal court Tuesday to bar potentially embarrassing testimony by NCUA board members Debbie Matz and Gigi Hyland and former chief corporate examiner Kent Buckham in the civil trial over the 2009 collapse of WesCorp FCU, which is projected to cost credit unions $7 billion to resolve.

In a request for a protective order filed with the U.S. District Court for the Central District of California NCUA claims the depositions of the three senior NCUA officials should be barred on the grounds that Robert Siravo, the former CEO of WesCorp, “has not shown that these high-ranking NCUA officials have direct personal factual information pertaining to material issues in this action and that such information is not available through any other source.”But lawyers for Siravo, who is being sued for negligence in the failure of the one-time $34 billion corporate, claim that senior NCUA officials, particularly Matz and Hyland, downplayed financial troubles at WesCorp and the other corporate numerous times and placed the causes on the market and other extraneous reasons. “It is no surprise that the NCUA wants to prevent this deposition; the statements are critical party admissions that show that as late as 2010 (after NCUA conserved WesCorp) the agency was singing the praises of the corporate credit unions’ handling of the economic crisis and decisions to invest in (residential mortgage backed securities),” said Siravo’s lawyers in defending their efforts for a public accounting of the agency’s actions in the corporate debacle.

“The NCUA board authorized this suit even though its members have admitted that they themselves believed these investments were safe and that WesCorp acted appropriately,” argued Siravo’s lawyers.

In seeking to quash the Matz testimony, NCUA lawyers say federal law requires that Siravo prove that the NCUA chairman had “direct personal factually information” pertaining to the WesCorp case and that any information to be obtained from her is not available through any other source. “Siravo has failed to make either such showing,” the NCUA lawyers told the court.

Siravo is one of five senior WesCorp officials sued by NCUA over the historic corporate failure. Three executives have settled charges against them with one other, former CFO Todd Lane, continuing to contest the charges.

The failure of five corporate — also U.S. Central Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union and Constitution Corporate Federal Credit Union — is projected by NCUA to cost credit unions $20 billion to resolve.

A hearing on the NCUA request is scheduled for July 31 before a U.S. magistrate.

Siravo’s lawyers cite the April 30, 2010 annual convention of the Illinois Credit Union League where Matz said, “Much of the blame falls outside the credit union industry.” Matz told attendees that RMBS like the ones that caused the WesCorp failure “have traditionally been relatively safe investments,” that did not experience significant losses, how credit enhancements like the ones used by WesCorp reduce the risk of investments in RMBS, and that all RMBS purchased by the corporate were permissible and met the agency requirements. She also said that RMBS “fit well into the corporate credit unions’ business functions,” and that “based upon historical performance” there was “very little risk” to corporate credit unions “with private-label mortgage backed securities” like the ones that sunk WesCorp.

Lawyers for the WesCorp executive also cited a June 2008 speech by Hyland, even as WesCorp was headed toward failure, when she said corporate credit unions were doing “just fine,” that their investments “continue to be extremely highly rated” and that their investments “continued to perform.” Hyland also said the corporate were “managing their unrealized losses and balance sheets “appropriately,” according to Siravo’s lawyers.

Siravo’s lawyers say the statements of the two NCUA board members are critical to their defense because they indicate that NCUA, just like Siravo, could not have known the ultimate effect of WesCorp’s investments. “These statements,” said Siravo’s lawyers, “cut to the heart of the NCUA’s theory that somehow Mr. Siravo should have figured out the problems with RMBS faster than anyone else, even the governing agency that was responsible for overseeing the industry.”

Buckham, director of NCUA’s office of corporate CUs at the time the crisis that eventually claimed five corporate credit unions was brewing, is now head of the agency’s office of consumer affairs.

Siravo is also planning on deposing the two NCUA examiners who worked on-site at WesCorp throughout the crisis; Lance McAllister, who is retired and now lives in Boynton Beach, Fla., and Joe Shoshoo, who still works at NCUA and lives in Indiana. Siravo had planned to depose former NCUA executive director Len Skiles, but withdraw that request.

NCUA does not comment on pending litigation.

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