Another lawsuit against ex-Washington Mutual CEO Kerry Killinger and other WaMu execs is being settled as major legal action against the officials responsible for America's biggest bank failure nears an end--without anyone going to jail and the bank's insurance company paying the tab.
According to documents filed last week in Seattle federal court, Killinger and the others have agreed to a $41.5 million settlement in a seven-year-old class-action case brought by bank stockholders who claimed the executives misrepresented--and failed to disclose material facts--regarding the profitability of WaMu's mortgage-lending business, leading to "artificially inflated" stock prices.
Settlement in the case, titled South Ferry LP #2 vs. Kerry L. Killinger et al, comes on the heels of another case, tentatively settled three months ago, in which another group of stockholders will receive $208.5 million, about half of it debited to Killinger and the execs but actually paid for by the bank's insurance company.
According to papers filed by Sammamish attorney Cliff Cantor on behalf of the plaintiffs, "insurance proceeds are being used to fund" the newest settlement as well. The outcome "is a favorable result under the circumstances," according to the filing. Killinger and the other defendants were willing to continue to fight on in court and maintained that stockholders "would not be able to establish the Defendants' liability or damages," asserting they have "valid defenses to the claims alleged."
In August, Seattle U.S. Attorney Jenny Durkan announced there would be no criminal indictments against Killinger and the other executives including Stephen Rotella and David Schneider. The Justice Department, despite an exhaustive investigation, Durkan said, could find no wrongdoing in the massive 2008 bank failure.
Killinger took home $25.1 million in compensation that year before he was fired, including a $15.3 million golden parachute. Over the previous five years, as the bank began its slide to oblivion, he earned $103 million in cash, stock, and options.
Still pending is a civil action, filed in March by the Federal Deposit Insurance Corp. seeking $900 million in damages from Killinger and the others. The FDIC alleges they were, at the least, negligent in their failed operation of WaMu. But that case too is reportedly nearing a settlement.