Tuesday, June 10, 2014

But This Time Things Are Different...


"WesCorp continues to work towards publishing its audited financial statements [for 2006].  We apologize for the delay and recognize that your credit union may require audited financial statements as part of your due diligence on WesCorp.  In the following paragraphs, we have tried to answer questions you may have regarding the audit and why it has been delayed. Thank you."

1. WesCorp has not yet published its 2006 audited financial statements. What is the delay?

"The delay in delivering the 2006 audited financials is the result of a disagreement between WesCorp's current audit firm, Deloitte & Touche, and it's previous audit firm, KPMG. The disagreement stems from their interpretation of FAS133 hedge accounting rules for WesCorp's derivatives portfolio."

2.  When does WesCorp expect to resolve this difference and issue its audited 2006 financial statements?

"WesCorp expects to issue the audited financial statements in the fourth quarter of 2007."

3.  What is the worst case impact of having to restate financial statements?

"As both D&T and KPMG have recognized, WesCorp's hedges are appropriate, economically sound and present no safety and soundness concerns."

"Over the duration of the derivatives, gains and losses on each position would "wash-out" or have an end result of zero. That is, a gain in one period would be negated by a loss in another, and vice-versa."

4.  Why does WesCorp invest in derivatives?

"Investing in derivatives is an essential part of WesCorp's business and is important to how we add value every day to our members. In addition, derivatives make WesCorp more safe and sound as we are able to reduce and/or eliminate interest rate risk that we would otherwise experience."

"WesCorp did nothing wrong in investing in derivatives...just the opposite is true...we did everything right by investing in derivatives."

5.  Does NCUA continue to maintain a team of expert capital market specialists on-site to monitor and oversee your derivatives trading? Do those reports continue to reach the NCUA Board on a monthly basis?

"Yes. " * 

*  (WesCorp was placed into conservatorship by NCUA on March 20, 2009 and liquidated by NCUA on October 1, 2010 at an estimated loss of $5.59 billion.)

1 comment:

Anonymous said...

And no one has been held responsible at Wescorp or the NCUA for the massive losses to the system. After all, they only invested in 'A' paper.
Georgia Birddog