Tuesday, July 5, 2011

FDIC Settlement Talks With Ex-Washington Mutual Officers Fail

Kerry Killinger, former Chief Operating Officer Stephen Rotella and David Schneider, WaMu’s former home-loans president, asked a judge to dismiss the FDIC’s suit after the negotiations failed, according to Barry Ostrager, a lawyer for Rotella and Schneider.

The FDIC sued the Washington Mutual Inc. officials in March, claiming they took extreme risks with the bank unit’s home-loans portfolio, causing billions of dollars in losses. The FDIC accused the executives of disregarding the bank’s long-term safety and fixating on rewarding themselves. The men received more than $95 million in compensation from January 2005 to September 2008, the FDIC said.

“The FDIC is essentially suing my clients for making business decisions that were fully disclosed, monitored, approved and transparent to the FDIC,” Ostrager said in the e- mail. “There is no legal basis for seeking to retroactively impose financial liability upon bank executives for making business decisions of a type that were common and unobjectionable at the time.”

In its lawsuit, the FDIC “says nothing about the worldwide economic crisis that would have led to the failures of virtually all large banks but for unprecedented government intervention that was not extended to WaMu,” lawyers for Killinger wrote.

David Barr, an FDIC spokesman, said the agency declined to comment.

The case is FDIC v. Killinger, 11-00459, U.S. District Court, Western District of Washington (Seattle). http://www.blogger.com/img/blank.gif

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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