Ex-WaMu CEO Close To Settlement Over Bank Failure
Former Washington Mutual chief executive officer Kerry Killinger and two other bank officials are in settlement talks with the Office of the Comptroller of the Currency, the last chapter in the government's probe of the largest U.S. bank failure.
The regulator is weighing a settlement with Killinger, former chief operating officer Stephen Rotella and David Schneider, former head of the home-loan division, over claims they mismanaged the Seattle-based thrift, according to a person who was briefed and spoke on condition of anonymity because the talks aren't public.
The person, who said the talks have entered the final stage, didn't describe the terms being discussed. The details of a deal would need the approval of senior OCC officials.
Washington Mutual, which was the nation's largest savings-and-loan and one of the largest subprime lenders, became a public symbol of the excesses of the housing bubble. The thrift and its subprime arm "engaged in a host of shoddy lending practices that contributed to a mortgage time bomb," the Senate Permanent Subcommittee on Investigations said in a 2011 report.
The bank was seized by regulators in September 2008 after reporting that it faced $19 billion in losses from soured mortgages. JPMorgan Chase & Co. bought remnants of the thrift and has since struggled to unwind itself from liability for Washington Mutual's faults.
In 2011, Killinger, Rotella and Schneider reached a $64 million settlement with the Federal Deposit Insurance Corp., which liquidated the bank. The FDIC sued the three executives for failing to tend to the thrift's safety while they received more than $95 million in compensation from 2005 until its collapse. Most of their payments under the settlement were covered by Washington Mutual's insurance policy.
The OCC's separate investigation stems from the agency's 2011 merger with the Office of Thrift Supervision, which had supervised Washington Mutual.
Daniel W. Turbow, a lawyer at Wilson Sonsini Goodrich & Rosati who has represented Killinger, 64, declined to comment. Rotella, 60, now CEO of New York-based StoneCastle Cash Management LLC, didn't immediately respond to a request for comment. Schneider, who until this year was CEO of Vericrest Financial Inc., an Irving, Texas mortgage servicer, didn't return a message left at a phone number listed to his name in New Jersey.
Bryan Hubbard, an OCC spokesman, declined to comment on the talks.
A Justice Department investigation into Washington Mutual ended in August 2011 without charges filed.