SEATTLE, Dec. 13 (UPI) — The Federal Deposit Insurance Corp. will settle its suit against top executives in the failed Seattle lender Washington Mutual for $64 million, officials say.
The FDIC had sought $900 million but officials said $64 million was the best outcome when weighed against the cost of litigating the case and the risk of losing in court, The Wall Street Journal reported. The deal is expected to be finalized soon, possibly as early as Wednesday.
“In any settlement, we’re not going to get the total amount that we’re seeking,” a senior FDIC official told reporters Tuesday.
Under the proposed settlement, about $400,000 will be paid directly by former Chief Executive Kerry Killinger, ex-President Stephen Rotella and former home loans President David Schneider, people familiar with the case told the Journal. The three will give up about $24 million in retirement and bonus claims against the bank’s estate and the remainder will be paid by the liability insurance from the failed bank.
The FDIC has obtained $125 million in a separate settlement with Washington Mutual, the Journal said.
The FDIC accused the three executives of making risky decisions that led to the thrift’s collapse in 2008. At $16.4 billion, it was the largest collapse of a financial institution in U.S. history.
Separately, Washington Mutual said in a release Monday it had reached a comprehensive settlement in bankruptcy court that would clear the way for the disbursement of more than $7 billion and lead to the company’s emergence from Chapter 11 reorganization.
“The proposed settlement agreement represents a positive step toward completing the Chapter 11 process,” the company said in a statement. “WMI believes that the value of the estate and recoveries for its creditors will be maximized by the implementation of the plan.”
The hearing will be held Jan. 11 for the court to consider approval of a disclosure statement with the expectation that there will be another hearing in mid-February to confirm the plan.
“The company hopes to emerge from Chapter 11 by the end of February,” the statement said.