Thrift depositor representatives believe there is more money available from state insurance carriers to recover depositor losses, and more documents disclosed this week can help the state tap the additional funds.
Sources familiar with the state's efforts to settle depositor claims said they believe the state can look harder at the possibility of filing claims on $200 million in past liability coverage. They said more than $20 million in claims is available based on admissions by a state official in 1985 of liability and fraud.Ray Christensen, a local attorney representing the state in a class action suit brought by several thousand thrift depositors, says an offer by the state to settle the lawsuit already includes resources from the state's insurance. Sources say the settlement, which would return 75 percent of depositors' money, requires $10 million in state funds.
Earlier this week, Christensen told a legislative task force, appointed by Gov. Norm Bangerter to find a solution to depositor claims against the state, that more insurance money isn't available because depositors' allegations of fraud and negligence stem from developments that happened after the state's liability coverage expired on July 1, 1985.
But depositors attorney Malcolm A. Misuraca disclosed to the task force unofficial minutes of a June 18, 1985 meeting of thrift industry leaders. According to the minutes, former Utah Commissioner of Financial Institutions Elaine B. Weis said depositors had been successfully duped into believing their money is safe and that the state would be liable for any losses.
"You know I think we've been pretty successful in putting out a good story as to why your depositors shouldn't be concerned," the minutes quote Weis as saying. "I don't know why anybody believes it. But we've been successful in doing it and we haven't had a run."
Weis' comments came at a trustees' meeting of the now defunct Industrial Loan Guaranty Corp., a private company established by the Utah Legislature in 1975 to guarantee deposits in the state's thrift and loans. About one year after that meeting, Weis declared the ILGC insolvent and took control of seven thrift and loans. Five of those thrifts are being liquidated and about 15,000 depositors standing to lose an estimated $47 million in savings.
Based on failures of private deposit insurance funds in other states, Weis told the ILGC in 1985, "the State of Utah is liable. The taxpayers of this state are liable for the sole guaranty coverage."
She recommended the trustees work with state regulators to make the ILGC a state agency with a moral obligation to guarantee any losses, which would give financial backing to any rescue plans and reduce the state's liability.
"I think that since the state of Utah already has the liability that to make this (the ILGC) a state agency with the moral obligation of the state makes the most sense," Weis said.
The minutes quoting Weis were taken by the ILGC's secretary, and recently discovered by thrift liquidator and accounting firm Grant Thornton. The documents included the secretary's handwritten note saying ILGC counsel had deleted "quite a bit of my minutes for the official version."
In a cover letter to the task force, Grant Thornton's managing partner for Utah, Roger Brown, said the minutes reinforce the liquidator's conclusions that the state improperly permitted the thrifts to accept deposits when ILGC protection was worthless and that the state's strategy since 1982 was to move as many depositor accounts away from the ILGC as soon as possible and to conceal the problem from remaining depositors.
"In our view, the state's intentions were to contain the damage in as few depositor dollars as possible. That goal makes a number of irregularities excusable, but only if the depositors remaining at the end are made whole," Brown said.
Stephen Mecham, governor's aide monitoring the thrift crisis, declined to comment on the possibility of receiving more insurance money for depositors because details on the state's settlement negotiations were confidential.
Task force co-chairman Sen. Chuck Peterson, R-Provo, said the documents didn't tell him anything new regarding the state's handling of the thrift failures, but he said the task force will seriously consider resources from the state's former insurance carriers as a way to finance a settlement with depositors.
A task force recommendation to settling the thrift crisis is due July 1 to Gov. Norm Bangerter.