Gov. Norm Bangerter and thrift depositors have a formidable task for the next two weeks in convincing legislators to pass a $100 million settlement of the depositors' class action lawsuit against the state.
Lawmakers, during a briefing on the settlement Wednesday, expressed doubt the deal struck between attorneys for depositors and the state will in fact resolve the thrift crisis, which has spawned a flood of lawsuits since Utah's thrift industry collapsed two years ago.The main question of legislators at the briefing is if the settlement can indemnify the state from further court action brought by depositors and others. Another issue is the distaste of paying legal fees through legislation. Also looming in the back of lawmakers' minds during this election year is the unpopular position of committing another $9 million in taxpayers' money to help thrift depositors.
Lawmakers will meet in special session Sept. 14 to consider legislation that would require an estimated $33 million bond and a $9 million appropriation to go toward returning $100 million of the estimated $106 million in depositors' savings frozen in five failed thrifts. Former state insurance carriers have agreed to contribute $19 million toward the settlement.
"I urge you and recommend you accept this resolution without moving away from the basic negotiated settlement," Bangerter asked lawmakers in opening the two-hour question and answer briefing.
But he also suggested they look at the settlement critically and "vote your conscience," to determine what is the best resolution to the thrift crisis.
From the questions and comments Wednesday it appears many lawmakers aren't convinced the hard-negotiated settlement before them is the best solution. Most of the questions centered on whether the settlement would actually settle legal action against the state.
Bangerter and attorneys for the depositors said a minority of depositors will opt out of the settlement and may pursue suing the state separately, but they said that would be unlikely.
The legislation also calls for a "good faith" settlement, which would indemnify the state by court order against any counterclaims or crossclaims brought by third-party defendants in the depositors lawsuit.
To recover 100 percent of their money, depositors who accept the settlement will pursue their claims, with the help of the state, against former thrift industry officials, legal counsel and accountants. Some fear those defendants, who claim they operated the thrifts within state law and followed directions of regulators, may countersue the state.
Sen. Lyle Hillyard, R-Logan, said he doubted a "good faith" settlement would be feasible under state law. Hillyard said he supports having depositors' attorneys indemnify and defend the state against any counterclaims.
Hillyard also questioned the legality of using part of the appropriation to pay depositors' legal fees, which could range between 20-40 percent of $28 million, but are subject to final approval by 3rd District Judge David S. Young.
Although it wasn't mentioned during the briefing session, lawmakers are also concerned about the political ramifications of approving the settlement in the midst of elections. Public opinion polls indicate a majority of Utahns don't favor using state tax revenue to help depositors recover their money.
"I don't know the politically prudent thing to do," Bangerter offered lawmakers, adding that he reasoned the settlement was the best way to resolve the debacle and protect the state from further litigation.