Washington Mutual Execs Win Deal With FDIC: Report
Three former Washington Mutual executives settled a $900 million lawsuit with the FDIC, getting away with paying nearly nothing in the wake of the largest U.S. bank failure ever, according to a Wall Street Journal report.
NEW YORK ( TheStreet) -- Three top Washington Mutual executives have settled a $900 million lawsuit with the Federal Deposit Insurance Corporation, for pennies on the dollar, according to a Wall Street Journal report. Washington Mutual Bank had $307 billion in total assets when it was shuttered by the Office of Thrift Supervision in September 2008, after which the FDIC sold the failed institution to JPMorgan Chase ( JPM) for $1.9 billion, in a deal personally arranged by former FDIC Chairman Sheila Bair, with JPMorgan CEO James Dimon. The FDIC sued former Washington Mutual CEO Kerry Killinger, chief operating officer Stephen Rotella and home-loans president David Schneider for $900 million in March, accusing the former officers with "gross negligence" and "breach of fiduciary duty," in taking "extreme and historically unprecedented risks with WaMu's held-for-investment home loans portfolio," and saying the executives "focused on short term gains to increase their own compensation, with reckless disregard for WaMu's longer term safety and soundness." According to the report, the FDIC's harshly worded lawsuit will be settled for just $75 million, with the bulk of the settlement paid by insurers and Washington Mutual's bankruptcy estate. Considering that "during the period from January 2005 to September 2008," the three executives "received more than $95 million in compensation," according to the FDIC, and that the U.S. Attorney in Seattle earlier this year decided not to file criminal charges related to Washington Mutual, it would appear that the legal strategy of the failed thrift's executives wasn't a total failure. The federal judge reviewing the settlement may have a different view from U.S. District Judge Jed S. Rakoff in Manhattan, who last month rejected an agreement between Citigroup ( C) and the Securities and Exchange Commission, where Citi tried to have civil securities fraud charges dismissed by paying $285 million. The judge said it was "neither reasonable, nor fair, nor adequate, nor in the public interest," for the regulator to settle with Citigroup, without the company admitting any wrongdoing. -- Written by Philip van Doorn in Jupiter, Fla. To contact the writer, click here: Philip van Doorn. -- Written by Philip van Doorn in Jupiter, Fla. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.