Washington Mutual executives set to settle financial crisis lawsuit
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Federal regulators are settling a lawsuit they had brought against three former executives at Washington Mutual Inc.for a small amount of the damages that were originally sought.
The Federal Deposit Insurance Corp. sued former Washington Mutual Chief Executive Kerry Killinger and two other executives in March, accusing the men of negligence that led to the bank’s failure in 2008.
While the FDIC had demanded $900 million in damages from the men, they are drawing up a settlement for a total of around $65 million, according to FDIC officials who spoke on the condition of anonymity.
The FDIC lawsuit has been one of the most high-profile efforts to recover money from the bank executives who led their institutions to failure during the financial crisis. Seattle-based Washington Mutual was the largest bank failure in U.S. history, and when the FDIC brought its suit it said that the executives’ ‘negligence, gross negligence and breaches of fiduciary duty caused WaMu to lose billions of dollars.’
When the FDIC first announced the case it said that WaMu had paid Killinger $65.9 million in the four years he led the bank before its collapse.
The $65-million settlement, which is still being finalized, is only a small portion of the amount that the regulators initially sought, and only a small portion of that small portion will actually be paid by the former WaMu executives, according to the FDIC officials.
‘In settlements neither side is going to be happy, that’s why you settle,’ an FDIC official said.
The FDIC official said today that the FDIC decided to settle to avoid the legal costs and risks involved in continuing to pursue the suit.
‘We’re not going to bring claims and spend a lot of money and end up without a whole lot,’ the official said.
As part of the settlement, Killinger, WaMu Chief Operating Officer Stephen Rotella and home lending chief David Schneider will give up claims they had to bonuses and golden parachutes. Their spouses, who had been named in the initial lawsuit, are released from all claims.
The money will go to pay WaMu creditors.
New of the settlement was first reported by the Wall Street Journal.
Lawyers for the executives did not immediately return calls seeking comment.
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-- Nathaniel Popper