The former owners Foothill Financial thrift and loan want a piece of the state's settlement with thrift depositors, otherwise the owners will pursue their $4.7 million claim against the state.
An attorney for Richard S. Prows and Robert W. Wood said he has been corresponding with the state, and their request to be included the $100 million settlement is still under consideration.State officials were unavailable late Monday for comment.
Meanwhile, liquidators of Commerce Financial have not officially signed off on the settlement and won't take a position until they have read it. "We are anxious for this thing come to a conclusion," said John Woods, directing the liquidation for Commerce's former owner and Utah auto dealer Larry Miller.
A group representing 15,000 depositors have tentatively settled their lawsuit with the state for $100 million. The group had filed a class action claim alleging fraud and negligence by the state and thrift industry officials in the failure of five thrift and loans. The settlement must be approved by the court and state Legislature.
Foothill Financial was not one of the five failed thrifts, but it closed down under pressure of a depositor run triggered by media reports that the institution was operating without effective deposit insurance while awaiting final approval from the Federal Deposit Insurance Corp.
Prows and Wood ended up selling the thrift to Zions Bancorp. and lost their $4.7 million investment in Foothill. The pair of developers filed a notice of claim against the state, alleging fraud, negligence and breach of contract.
In a letter to the state last June, Foothill attorney Dennis Poole said Prows and Wood saved Foothill's depositors from becoming part of the class action lawsuit by guaranteeing Foothill's accounts to facilitate the sale to Zions.
Therefore, Poole wrote, any settlement with the depositor group must include losses suffered by Prows and Wood or else the pair would pursue their claim against the state.
In the notice of claims, served on the state last April, Prows and Wood said they bought the institution in 1985 with promises from state regulators that deposits would be guaranteed by the Industrial Loan Guaranty Corp. until Foothill could obtain federal deposit insurance.
The ILGC was declared insolvent and five of its member thrifts shut down and placed under liquidation. But Foothill was allowed to continue its pursuit of FDIC coverage, until officials publicly disclosed it was operating without effective insurance, precipitating a run.
Commerce Financial was one of the five failed thrifts placed under liquidation. A 3rd District Court judge allowed Miller to sell the thrift assets over the next five years to return Commerce depositors, who were included in the class action lawsuit, at least 70 percent of their money.
Woods said he has no reason to believe Miller would want to be included in the settlement. "He has given no indication that that is a point of negotiation," Woods said, noting that Miller agreed to liquidate Commerce to return as much money as possible to the depositors.
The former owners of Western Heritage also filed suit against the state, alleging fraud and breach of contract. Former owner Larry Hendricks said he and his partner Kent Brown would like to be part of the settlement, but "I don't think it would work."
Instead, Hendricks and Brown will continue with their 3rd District Court complaint.