A settlement of the controversial thrift problem may be at hand, if Republican legislative leaders can get enough votes to push it through.
Lawmakers will meet in special session at 2 p.m. Friday to approve a compromise settlement - one different than the one negotiated by Gov. Norm Bangerter, depositors and the state's former insurance carrier.The new plan still comes up with $100 million for the depositors, who lost $106 million when five thrifts, insured by an insolvent state-created guarantee fund, went under two years ago. But the new agreement doesn't risk as much taxpayer money as the settlement reached by Bangerter.
Senate Majority Whip Dix McMullin, R-South Jordan, said the deal is complete, following evening negotiations with the governor and depositor attorneys Wednesday. However, House Republicans have yet to approve the matter in formal caucus vote, and Democrats in the House, who hold their trump card of enough numbers to scuttle any agreement for 60 days, haven't yet joined up, either.
The real sticking point in the settlement has been how much state money will be risked. Bangerter wanted to bond for $31 million to buy the remaining assets in the thrifts - assets that many GOP lawmakers consider questionable in worth. Under that plan the state took all of the risk.
GOP senators just wouldn't go along with their governor, much to his displeasure. Instead of a bond, Republican senators worked out a deal where the state would pay $15 million up front - cash from state reserves. As thrift assets are liquidated, proceeds will be split 50-50 between depositors and the state. When the $15 million has been repaid, the depositors will pocket anything beyond that amount. Under this plan the risk is shared. For example, if there turns out to be only $15 million in assets, not $30 million, then the state loses $7.5 million and the depositors lose $7.5 million.
"We feel good about it. We finally got a deal that everyone is going to support," said depositors' attorney George Haley. "The only real difference is that we (depositors) must share the risk of the assets in liquidation, and we deemed that a reasonable request."
The new compromise means it will take a longer time for depositors to get their money back as they wait out liquidation. But Haley said he is confident about the appraised value of the thrift assets and that the state's settlement will eventually net more than 90 percent of depositors' savings.
During daylong negotiations and caucuses Wednesday, Senate President Arnold Christensen, R-Sandy, said several times that he wonders if there is as much as $5 million in real assets left in the thrifts.
But McMullin said most lawmakers believe there is at least $31 million there.
"We feel comfortable with that figure," he said, so the state shouldn't lose any of that money. "We consider (the $15 million) a kind of revolving loan," said McMullin.
Some lawmakers also didn't like the idea of depositor attorneys getting between $6 million and $12 million in fees. About 85 percent of depositors have signed agreements that give a pool of attorneys 20 percent to 40 percent of all money collected from the state. At first, the Republican leaders wanted to place a $1.5 million cap in the settlement bill. But legislators were
old time and again that the judge handling the lawsuit by depositors against the state would decide those fees. So, McMullin said, lawmakers and depositor attorneys agreed to language in the bill that will "recommend" to the judge that fees not go beyond $1.5 million.
Thus, in this election year, if the judge decides to give the attorneys millions of taxpayer dollars, the lawmakers can tell constituents they did the best they could.
GOP lawmakers placed other conditions in the new agreement that Bangerter also didn't have but now agrees to, said McMullin. (See box on B1.)
One of those added conditions is that 90 percent of depositors must accept the agreement within 90 days or the whole deal is off. Earlier Wednesday evening, Bangerter said the 90-day limit was a cop-out because it let legislators off the hook for reaching a final agreement. But Bangerter now accepts that condition.
Haley said now that the state has finally made a deal with depositors, third-party defendants in the class-action lawsuit will come to the bargaining table and settle up, returning more money to depositors. Officials will meet Friday to see what third parties are willing to settle now.
Depositors filed their class-action claim in 3rd District Court last year, accusing the state and thrift industry officials of fraud, negligence and racketeering in operating the ailing industry.