A legislative panel has given attorneys for the depositors of five failed thrifts the go-ahead to pursue legal action against accountants and officers involved in the former financial institutions.
"We're going to proceed in court and get this business going," said Malcom Misuraca, lead attorney for the depositors, from his San Francisco office.Richard G. Hackwell, of the Salt Lake law firm Haley & Stolebarger, which has been representing the depositors since the original lawsuit was filed in 1987, was elated at the decision of the legislative panel.
"We are very pleased . . . and grateful that the thrift panel cleared the way for (depositors) to pursue their remaining claims against the remaining defendants."
He said those defendants include what were then four of the so-called Big Eight accounting firms (two have since merged): Touche Ross, Deloitte Haskins and Sells (now Deloitte & Touche), Peat Marwick Main & Co. and Coopers & Lybrand. Also included among defendants are officers and directors of former thrifts Commerce Financial, Western Heritage and Interlake Thrift.
Depositors lost more than $100 million when five state-chartered thrifts closed in 1986 and later were seized by regulators. In 1988, the Utah Legislature approved an $84 million settlement for depositors.
But the report recommended the state pay the insured depositors their full principal plus a "fair" rate of interest.
" This doesn't open up anything new where the state's concerned," said Steve Mecham, Gov. Norm Bangerter's chief of staff.
The depositors and their attorneys accepted the state settlement with understanding the offer was final, Mecham said. "The state settlement is final. The deal is what it was in 1988," he said.
But the settlement with Utah did not preclude action against the remaining defendants, and Hackwell said the way now has been opened for that action.
"The report suggests the state should pay the entire portion," said Hackwell, "but they have settled, and so now the depositors will turn to the accountants and company officers and directors of the thrifts.
"I want to say that, when the state settled, Governor Bangerter did an admirable job of trying to get these defendants to come to the table. They chose not to settle at that time."
The state refused to provide any additional money to cover losses considered to be the responsibility of third parties but agreed to form an investigative panel to determine if claims against the accounting firms and thrift officers could be pursued in court.
The panel concluded that Utah thrift-insurance officials deliberately misled depositors about the safety of money held in state-chartered thrifts in the 1980s.
"This conduct, if done by any private citizen, would not only constitute fraud, it would be a felony in Utah. The state apparently did not simply know of this fraudulent plan (which would be bad enough given the state's pervasive regulatory authority, and one would think duty, to prevent such an abuse), but it also appears actively to have assisted the plan," the panel report says.
Further, the three-man panel concluded "it would not be equitable to bar depositors from recovering their losses from culpable prospective defendants based on alleged misconduct by the state designed to protect other depositors."
The panel described the Industrial Loan Guarantee Corp.'s insurance fund, which was supposed to guarantee the deposits, as a sham.
"While the fine print in the ILGC brochures set out some of the limitations on the ILGC fund's responsibility and ability to insure thrift depositors, it is fair to say that the entire ILGC insurance system was a sham from the start in economic terms," the report stated.