Gov. Norm Bangerter should know this week whether the state will receive help from insurance carriers and local businesses in settling thrift depositor claims, and prospects for a settlement are "reasonably good," a state official said.
"They want a reasonable settlement soon," Bangerter aide Stephen Mecham said of parties who met with the chief executive behind closed doors last week. "We should hear from them by mid-week."Mecham summed up the meetings as "time well-spent and relatively productive. The prospects for a settlement are reasonably good."
To help settle a multimillion-dollar class action lawsuit brought against the state by some 15,000 thrift depositors, Bangerter wants contributions from former thrift industry officials, and he hopes to tap an estimated $100 million in liability coverage the state had while it was trying to salvage the state's ailing thrift and loan industry.
The thrift industry finally collapsed after state regulators declared the Industrial Loan Guaranty Corp., a private deposit insurance fund established by the state to guaranty thrift deposits, insolvent on July 31, 1986.
Since that time, five thrift and loans have been placed under liquidation orders, and once thrift assets are sold in the next few years, depositors stand to lose an estimated $36 million in principal - $47 million including interest - out of $100 million in deposits.
To pick up the estimated shortfall, an organization of thrift depositors, Depositors of Insured Thrifts (DOIT), has filed a class action lawsuit in 3rd District Court against the state and several hundred other businesses and individuals, alleging fraud, negligence and racketeering in regulating and running the defunct, privately insured thrifts.
Sources familiar with the settlement talks, which have been going on since early spring, said the state hopes insurance carriers will contribute at least $25 million toward a settlement, while other defendants will add an unknown total and the rest would come from a legislative appropriation.
Bangerter has said his objective is to settle the case, which could otherwise take several years and thousands of dollars in legal fees to litigate, using the least possible amount of taxpayer dollars.
State officials met early last week in separate meetings with insurance carriers - Compass, Colonial Penn and Cal Union - and with attorneys representing other defendants and potential defendants in the case. Mecham declined to specifically identify the other defendants, other than the former professional advisors to the ILGC and the fund's trustees.
Other defendants named in DOIT's lawsuit include all the thrifts that were once members of the ILGC, including those owned by local banking giants First Security Corp., Valley Bancorp. and Zions Bancorp, and the law firm of Watkiss & Campbell. Potential defendants include one or more accounting firms.
DOIT's complaint has been criticized by defendants as naming "everyone between South Temple and Fourth South in downtown Salt Lake" in a legally flawed, shotgun approach to find a deep pocket to settle depositor claims.
Mecham said the state has not suggested to the other defendants in the suit that they contribute a certain dollar amount toward the settlement. "We only asked that they respond by midweek," he said.
Depositors are seeking 100 percent of principal, interest and attorneys fees, which could range between $10 million and $20 million.
DOIT's legal counsel has said previously it may settle for principal, then collect interest and attorney's fees by going after defendants who choose not to settle.
DOIT turned down a recommended settlement in June by a state appointed task force that offered 100 percent of principal, but required a state litigation team to negotiate with defendants and not depositors' attorneys.