Investors in Washington Mutual Inc. (WAMUQ), the former owner of the biggest U.S. bank to fail, reached a settlement in a group lawsuit over the bank’s lending practices, according to a court filing.
“The court has been advised of a pending settlement in the lead securities class action portion” of the multidistrict litigation, according to papers filed yesterday in federal court in Seattle.
The lawsuit consolidates more than 20 cases claiming the bank secretly lowered lending standards, artificially inflated home-price appraisals and failed to disclose its deteriorating financial condition when the loans began to fail.
The tentative settlement is for more than $200 million, the Seattle Times reported, citing an unidentified lawyer familiar with the case. Much of the settlement will come from insurance policies covering the defendants, according to the newspaper.
Barry Kaplan, a lawyer for former Chief Executive Officer Kerry Killinger, a defendant, and Chad Johnson, a lawyer representing the investors, didn’t immediately return calls for comment.
WaMu, based in Seattle, filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan Chase & Co. for $1.9 billion. Washington Mutual Bank was the biggest bank to fail in U.S. history, with more than 2,200 branches and $188 billion in deposits.
The case is In re Washington Mutual Inc. Securities, Derivative & ERISA Litigation, 2:08-md-01919, U.S. District Court, Western District of Washington (Seattle).
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