Utah lawmakers have found a way to save face in one aspect of the failed thrift fiasco - paying millions of dollars in depositor attorneys' fees.
After a Tuesday evening meeting with Gov. Norm Bangerter, depositor attorneys and others, GOP leaders said they found a way to cap the attorneys' fees.But it was still unclear Wednesday if legislators would meet Thursday in special session to vote the thrift settlement up or down.
A number of lawmakers, in this election year, weren't keen on paying $6 million to $12 million in depositor attorneys' fees as part of a $60 million settlement package. So they agreed that a clause could be placed in the settlement, capping the fees at about $1 million.
The catch is, in a class-action suit like the depositors', the judge decides attorneys' fees. So the settlement would say if the judge disagreed with the $1 million cap, he could throw it out and award whatever is fitting. That way, lawmakers up for election could tell concerned constituents they tried to limit attorneys' fees, but the judge wouldn't go along - just the political out many are searching for.
Besides the question about attorneys' fees, lawmakers are still concerned about the real value of thrift assets and whether to bond or pay cash for the state's share of the settlement.
Republican leadership met again early Wednesday to go over the settlement bill and possibly consider when to reconvene the special session and vote on it.
"If our questions are answered then we will caucus and take a vote" to determine whether the special session could be held to handle the settlement legislation, said Senate President Arnold Christensen, R-Sandy. Republicans couldn't decide the matter last Wednesday, and adjourned indefinitely.
The legislation would settle a class action lawsuit brought by 15,000 depositors who stand to lose a substantial amount of their savings from the failure of five thrift and loans. The institutions' deposits were insured by a state-created guaranty fund, the Industrial Loan Guaranty Fund, which was declared insolvent two years ago. The complaint alleges the state and thrift officials committed fraud and negligence in operating and regulating the thrifts and ILGC.
Bangerter, with the help of a former state insurance liability carrier, reached a settlement with depositors last month that calls for a $32 million bond and a $9 million appropriation. Insurance carrier California Union Insurance Co. agreed to contribute $19 million.
In addition to paying attorneys' fees, lawmakers are uncertain about the state inheriting a portfolio of worthless thrift assets in exchange for reimbursing depositors.
Christensen said legislators have heard horror stories about the thrift assets, which include a submarine in Utah County, acres of land in depressed eastern Utah and developments of questionable value. Under the settlement, liquidating the assets would pay off the bond. Christensen said he personally believes if there is $5 million in real value in the $32 million of listed assets, he wouldn't be surprised.
Christensen said lawmakers are considering whether bonding is the best financing tool or if the state should propose depositors be reimbursed as assets are liquidated. The ongoing liquidation of thrift assets has netted depositors $40 million of the $106 million they had when the thrifts went under.
If Republican leadership decides the Legislature should convene Thursday, it doesn't mean the thrift settlement necessarily has the votes to pass. House Democrats are upset they weren't invited to Tuesday's meeting with the governor and they believe election-year politics is controlling the situation. They are threatening to delay action on the bill until after November's election.
"This has turned into a partisan issue and we don't want any part that," said House Miniority Leader Mike Dmitrich, D-Price. "This has gone on for two years; what's another month?"
Dmitrich said Democrats were ready to vote on the proposal last week and don't want to jeopardize the settlement, but "right now this smacks of partisan politics."
Meantime, depositors, baffled by the political undercurrents influencing the settlement, are roaming the halls with signs telling lawmakers to deal with the settlement now.
"Politics are a foreign culture to us (depositors) . . . ," said depositor Sheila Bohard. "We are here just to let ourselves be known."