After months of in-court fighting to gain access to records pertaining to Utah's thrift crisis, a clerical error finally brought the controversial documents to public light.
On Saturday, U.S. Magistrate Ronald N. Boyce granted a motion by the Deseret News and KUTV to release documents previously under a federal court protective order. But Boyce's decision came after a federal court clerk inadvertently handed the sealed information over to a news reporter for KSL-TV on Friday.Boyce has declined comment on the accidental release but said KSL did not violate a court order by releasing a story about the documents' contents.
The documents included internal memos between Utah's Department of Financial Institutions and Gov. Norm Bangerter about the critical condition of Utah's thrift and loan industry, which collapsed months after the memos were written.
Of particular interest in the memos are comments by George R. Sutton, then deputy commissioner of financial institutions, expressing concern about the state's deceiving depositors by allowing them to put money into insolvent thrift and loans.
It was those comments that fueled the state's fight to keep them from the public.
"Our concern was that those strong comments would be taken out of context," Sutton, who is now financial institutions commissioner, told the Deseret News.
The memos were a small segment of four binders of exhibits in a $57 million lawsuit brought by depositors of Copper State Thrift and Loan against the thrift's former owners and directors.
Depositor attorneys had sought the documents since July 1987 and finally gained access to them early this year after Boyce and U.S. District Judge David Sam both agreed Sutton couldn't invoke executive privilege and withhold the documents.
The order only allowed access for the attorneys, however, and the Deseret News and KUTV had filed their motion to lift that provision of the protective order.
"The outrageous thing about this is how much taxpayers' money was spent to hide these things from the public," said the media's attorney, Pat Shea.
Copper State attorney Ross Anderson agreed, saying it took him six months to battle the state's delaying tactics before he could see the documents.
But he said it was worth the fight. Besides the memos, other documents support his clients' case that the deposits were securities and that Copper State's owners did not provide proper disclosures of risk to depositors.
The memos reveal that state officials knew Copper State was on the verge of collapse and operating at a constant loss four months before regulators shut it down on July 31, 1986. Anderson contends all but one of his 50 depositor clients put money into Copper State after April 15, 1986.
The memos are also exhibits to a depositor class action lawsuit in state court filed against the state and several hundred other defendants. Because that order is still in effect, depositor attorneys will not comment on the documents' impact on their suit. But many depositors believe the memos substantiate their claims of fraud.
Besides bolstering his case, Anderson said he hopes the now-public documents will assist a legislative task force, which is investigating the collapse of Utah's thrift industry in 1986 and is to recommend a solution to Bangerter for recovering depositor losses.
Sutton, who said efforts to keep the documents from the public and opposing legal counsel were made upon the advice of the state's attorneys, agreed that the memos and other papers will help the task force discern the state's liability in the debacle.
He hopes the task force members "will recognize how difficult, how carefully and how tortured the decision-making was," he said, noting the memos were to inform Bangerter of what decisions were being made. Sutton said the governor approved of the actions of former Financial Institutions Commissioner Elaine B. Weis.
He explained that it's not unusual to keep an insolvent institution operating while regulators consider a solution. But, he said, the memos express that options were running out to rescue seven troubled thrifts and their deposit guarantor, the Industrial Loan Guaranty Corp., and it was coming to the point where keeping them operating would constitute a fraud.
"The decision-making was pretty intensive at that point (in the spring of 1986), and everyone agreed that all of the choices were awful," either liquidating the thrifts or consolidating them into a single institution, he said.
The state eventually took the ILGC into receivership and took control of the guaranty fund's seven remaining member thrifts, holding more than $100 million in deposits. Two of those thrifts were rescued, but five are now being liquidated, with some 15,000 depositors standing to lose substantial amounts of their savings.
Regulators have said their actions at least reduced depositor losses by more than $500 million after 1983 by keeping insolvent thrift companies operating and allowing healthier thrifts to leave the ILGC for federal insurance.
But, while Anderson doesn't doubt the good intentions of the state officials, he said they should face the consequences of their decisions and take care of the depositors left holding the bag.
"It may have been good policy at the time, but once the dust settles you need to take care of those sacrificed," he said.