Seven years after Washington Mutual Inc. collapsed in the biggest U.S. bank failure, two of its former top executives are still looking for their “golden parachutes.”
Former Chief Operating Officer Stephen Rotella and David Schneider, former president of the home-loans unit, are among a group of about 70 former employees who say they are entitled to “golden parachute” payments, or compensation usually guaranteed to employees when a company is sold.
Posted in Uncategorized
Law360, New York (December 23, 2014, 6:48 PM ET) — A Delaware bankruptcy judge on Tuesday signed off on a $37 million settlement of a suit brought by Washington Mutual Inc.’s liquidating trust that accused the holding company’s former officers and directors of recklessness for approving a $500 million transfer to Washington Mutual Bank shortly before it collapsed.
U.S. Bankruptcy Judge Mary F. Walrath approved the deal, which ends litigation in Washington state as well as a dispute in Bermuda with insurers who balked at picking up the defense tab for the former leadership. The settlement…
A bankruptcy judge Tuesday tied up a remaining loose end from the 2008 collapse of Washington Mutual Bank, endorsing a $37 million settlement of the company’s claims against its former leaders.
Judge Mary Walrath signed off on the settlement at a hearing in the U.S. Bankruptcy Court in Wilmington, Del., where the failed thrift’s corporate parent, Washington Mutual Inc., took refuge in 2008.
Regulators seized the troubled subprime lender and sold it to J.P. Morgan Chase & Co., adding to the shaking of the U.S. financial system.
Once a staid savings and loan, Washington Mutual became an enthusiastic participant in the home loan boom, creating what a Senate panel later called a “time bomb” doomed to blow up in investors’ faces.
The settlement approved Tuesday ends some of the litigation over who was to blame for Washington Mutual’s failure including legal fights with insurance companies that balked at paying.
Washington Mutual’s trustees accused the company’s leaders of neglecting their duties to look out for the parent company.
For example, they sought to recover $500 million of parent company funds that were diverted to prop up the finances of the thrift. The thrift, and the $500 million, fell into the hands of regulators.
(CN) – A federal judge refused to unseal files related to Washington Mutual Bank’s alleged rigging and steering of appraisals to benefit mortgage lenders before market crashed.
The case in Washington, D.C., stems from a 2008 federal class action that Felton Spears Jr. and Sidney Scholl first brought in San Jose, Calif., against Washington Mutual Bank, Lender’s Service Inc., and the Santa Ana appraisal-management firm First American eAppraiseIT.
Spears and Scholl said that back in 2006 WaMu had eAppraiseIT and Lender’s Service provide inflated mortgage-loan appraisals, so that the bank could sell the aggregated security interests in the properties at higher prices.
At WaMu’s direction, eAppraiseIT and Lender’s Service hired former bank employees as appraisal business managers who could override the values determined by third-party appraisers, the complaint alleged.
The court in San Jose, Calif., dismissed all but a claim under the Real Estate Settlement Procedures Act against eAppraiseIT in 2009, and U.S. District Judge Ronald Whyte certified the class in April 2012.
In Washington, the plaintiffs served the Office of the Comptroller of Currency (OCC) with a subpoena for documents that the U.S. Senate Permanent Subcommittee on Investigations (PSI) cited in a 2011 report on the 2007-08 financial crisis.
Though the Office of Thrift Supervision, which has since been succeeded by the comptroller’s office, gave the Senate the documents under seal and without waiver of any privileges, the comptroller objected to the subpoena, noting that many files may be privileged.
Posted in Uncategorized
Law360, New York (October 31, 2014, 8:07 PM ET) — Bank of America counsel told a New York federal judge Friday that they’ve reached a meeting of the minds with pension funds suing BofA and US Bank, which are the trustees of 19 Washington Mutual mortgage-backed securities portfolios that have allegedly experienced over $3.3 billion in recognized losses.
The funds claim that the two banks ignored the presence of loans in the trusts that they knew were backed by “incomplete or defective” files or had underwriting problems that allegedly contributed to billions in losses. After a…
SEATTLE (CN) – Top officers of WMI, Washington Mutual Bank’s parent company, wasted half a billion dollars by transferring assets to the doomed bank just two weeks before it was seized by federal regulators, unsecured creditors claim in court.
WMI Liquidating Trust, representing the Official Committee of Unsecured Creditors of Washington Mutual Inc., sued 16 former WMI officers and directors for breach of fiduciary duty and corporate waste, on Tuesday in King County Court.
Washington Mutual was placed into receivership in September 2008, becoming the largest bank failure in American history.
The Trust claims that WMI officials “responded out of panic rather than reason” when they transferred, or downstreamed, $500 million to the bank on Sept. 10, 2008.
September was the height of the “financial tsunami” and there was rampant speculation that Washington Mutual would soon collapse, according to the lawsuit.
“The prudent decision would have been to preserve WMI’s assets at this critical time rather than to place them in the failing WMB [Washington Mutual Bank],” the Trust says.
Instead, the officer defendants and director defendants “responded out of panic rather than reason,” according to the complaint. “They abandoned the interests of WMI and allowed the September Downstream, despite the complete absence of any evidence of deliberation as to whether a transfer should be made at that time. Half a billion dollars of WMI’s capital, which otherwise would have been available for the benefit of WMI’s creditors and shareholders, instead was transferred outside of creditors’ reach to WMB, a distressed entity facing imminent seizure.”
Regulators seized Washington Mutual on Sept. 25, 2008. It was sold out of receivership to JP Morgan Chase Bank.
The capital infusion was “utterly irrational” and did nothing to help the bank’s liquidity, the complaint states.
Posted in Uncategorized
MIAMI (CN) – A title insurer owes $4.9 million for contributing to the failure of mortgages that caused the defunct Washington Mutual Bank to lose millions of dollars, a federal judge ruled.
The Florida-based Attorneys’ Title Insurance Fund (ATIF) issues title insurance policies in real estate transactions. Agents and attorneys in its network may also act as closing agents, supervising the final transactions between buyers and sellers and overseeing the transfer of money and property.
Between 2005 and 2007, ATIF provided closing agents for 14 South Florida residential loans extended by the now-failed Washington Mutual Bank. The Federal Deposit Insurance Corporation, which took over WaMu in 2008 and investigated 500 of its defaulted loans, alleged that ATIF’s agents caused WaMu to lend money to unqualified borrowers under false pretenses, leading to more than $9 million in losses for the bank.
The FDIC claimed in a 2012 federal complaint that the title insurer refused to honor agreements in which it promised to reimburse WaMu for losses arising out of its closing agents’ fraud or their failure to follow the bank’s closing instructions.
In addressing the parties’ motions for summary judgment, U.S. District Judge Patricia Seitz ruled that the FDIC has standing to pursue damages based on the closing indemnity agreements. Even though WaMu sold the loans in question to Chase in 2008, the indemnity agreements are separate from the loans’ title insurance policies, because they protect lenders against different risks, according to the Sept. 3 ruling.
Indemnity agreements are designed “to quell a lender’s understandable fear of entrusting an unknown agent with large sums of money and important legal documents,” while title insurance protects against defects in title, the 28-page order states.