Washington Mutual gets OK to settle three lawsuits for $113.45 million

By Jim Witters

Wilmington, Del., Sept. 6 - Washington Mutual Inc. received court approval on Sept. 6 to settle three lawsuits against the company's directors and officers for a total of $113.45 million.

The approval came during a hearing in U.S. Bankruptcy Court for the District of Delaware.

The first settlement calls for payment of $105 million to the Ontario Teachers' Pension Plan Board, the Pompano Beach (Fla.) Police and Firefighters' Retirement System and the Police and Fire Retirement System of the City of Detroit and other defendants.

The lawsuit involved notes issued in 2006 and 2007 in which the groups claimed WaMu directors and officers "made or controlled others who made materially false and misleading statements about, among other things, the effectiveness of WMI's risk management procedures, the fairness and reliability of the appraisals received in connection with WMI's loans, the quality of WMI's mortgage underwriting procedures and WMI's financial results."

The settlement must also be approved by the U.S. District Court for the Western District of Washington. A hearing there is scheduled for noon ET on Nov. 4.

The second settlement will pay more than $4.2 million to Flaherty & Crumrine Preferred Income Fund Inc., Flaherty & Crumrine Preferred Income Opportunity Fund Inc., Flaherty & Crumrine/Claymore Preferred Securities Income Fund Inc., Flaherty & Crumrine/Claymore Total Return Fund Inc. and Flaherty & Crumrine Investment-Grade Fixed-Income Fund.

The settlement stems from a 2009 California case in which the Flaherty funds claim they bought unregistered Washington Mutual Preferred Funding Trust securities in March 2006 and October 2007. Flaherty claimed Washington Mutual directors and officers made misleading statements in connection with those offerings. They asserted fraud and negligence.

In the third settlement, the Monterey County, Calif., treasurer and the city of San Buenaventura will receive $4.25 million.

Monterey County and San Buenaventura sued Washington Mutual in 2009, asserting that Washington Mutual directors and officers "engaged in fraud, deceit and negligent misrepresentation" concerning the company's finances and risk management activities when the governments were buying and holding Washington Mutual Bank notes.

Washington Mutual admitted no wrongdoing on the part of its directors or officers. Payment of each settlement would come from insurance policies the company carried on its directors and officers. No money would be paid from the estate.

Washington Mutual, a Seattle-based savings and loan holding company, filed for Chapter 11 bankruptcy on Sept. 26, 2008, in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 08-12229.

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