Legislators are considering protecting some former thrift officials from a class-action lawsuit brought by depositors - a proposal that could strengthen the depositors' case and increase the cost of the settlement for the state.

Last week, lawmakers indefinitely postponed acting on a settlement between depositors and the state until a list of concerns was addressed. Among those concerns was whether selected former trustees of the Industrial Loan Guaranty Corp. should be indemnified from further litigation."I can't see how the trustees are liable," said Sen. K.S. Cornaby, R-Salt Lake.

The ILGC was a non-profit corporation created by the Legislature to guarantee deposits of the state's industrial loan companies, or thrift and loans. When the ILGC was declared insolvent by state regulators two years ago, five of the fund's member institutions were taken over and placed under a court ordered liquidation.

About 15,000 depositors have received more than $40 million of their $106 million lost in the thrift failures. To recover the rest of their savings they filed a lawsuit in 3rd District Court against the state and numerous thrift industry officials, who also sat as board members of the ILGC. The lawsuit accuses defendants of fraud, negligence and racketeering in operating and regulating Utah's troubled thrift industry.

A principal contention made by depositors is that the ILGC and its trustees were agents of the state and therefore the state is responsible for the funds failure and losses. ILGC trustees have moved to dismiss the case arguing that they only followed state law approved by the Legislature to run the thrift industry, while the state has held that the ILGC was a private entity and not an agency of the state.

But last week, lawmakers apparently were not too sure where the ILGC stands and are considering whether to determine that ILGC trustees, who were not directly affiliated with a thrift, were in fact agents of the state and include them in a settlement between depositors and the state.

Gov. Norm Bangerter negotiated a settlement to return $60 million more of depositors' savings through a bond issue and appropriation. The settlement would clear the state, but allows depositors to pursue claims against ILGC trustees and remaining defendants in their case.

Cornaby explained that only trustees who were not thrift owners but appointed by the state to the ILGC board would be included in the settlement with the state. Other trustees or thrift industry officials, such as thrift owners or private attorneys and accountants, could join the settlement for a price.

"Many of us feel that out of a sense of fairness these trustees (who were not personally involved with the thrifts) were public servants and we can't leave them hanging out to dry," he said.

Depositors' attorneys won't discuss what their negotiating strategy would be be if lawmakers approached them about including ILGC trustees in the settlement. But, depositor attorney George Haley said it would obviously require an increase in the amount of the settlement.

He said depositors would seek to recover their remaining $6 million in accounts and possibly lost interest by pursuing claims against former ILGC trustees.

In any case, if the Legislature determines the ILGC was a state agency, it would significantly strengthen the depositors' case if it went to court, he said.

Bangerter said the ILGC trustees and other defendants in the depositors' suit were invited to join in the settlement, but none of them did.

Former ILGC trustees and their attorneys, however, roamed the Capitol halls during last week's special session and alerted lawmakers before the session that they were not invited to settle.

"We are being told they were not contacted at all," Cornaby said.

An attorney, Cornaby has said his law firm represents a former owner of Copper State Thrift and Loan in a separate federal court action brought by a small group of Copper State depositors. But, he said his firm's client is not a former ILGC trustee.

Author of the settlement bill, Sen. Fred Finlinson, R-Murray, has said his firm represents two former ILGC trustees from the former Lockhart Co. thrift, which folded before the 1986 collapse. But, Finlinson, who is angered by the delay in approving the proposed settlement, said he is not representing them or being compensated by them in his drafting the legislation.

Another reason to explore whether ILGC trustees were agents of the state is to give all third parties another chance to settle, Cornaby said.

"It gives finality to the settlement by affording third-party defendants an opportunity to settle up if they have to," he said.

Lawmakers have not taken an official position on whether ILGC trustees were agents of the state, Cornaby said, nor have they considered the ramifications of making such a determination. But, he explained that the question is there and could cost the state in the long run.

If depositors win a judgment against ILGC defendants, the state could face countersuits by those defendants. Depositors have agreed not to collect any judgment from third-party defendants that would be paid from a counter judgment against the state.

But Cornaby said the desire of lawmakers is to use the settlement to end the thrift crisis and the subsequent flood of legal action involving the state once and for all. "We want some finality, particularly with the state."