Washington Mutual settles two lawsuits, seeks court approval of terms

By Jim Witters

Wilmington, Del., Aug. 3 - Washington Mutual Inc. is seeking court approval of two settlements in lawsuits against its directors and officers, according to documents filed Wednesday in U.S. Bankruptcy Court for the District of Delaware.

One settlement would pay more than $4.2 million to plaintiffs Flaherty & Crumrine Preferred Income Fund Inc., Flaherty & Crumrine Preferred Income Opportunity Fund Inc., Flaherty & Crumrine/Claymore Preferred Securities Income Fund Inc., Flaherty & Crumrine/Claymore Total Return Fund Inc. and Flaherty & Crumrine Investment Grade fixed Income Fund.

The proposed settlement stems from a 2009 California case in which the Flaherty funds claim they bought unregistered Washington Mutual Preferred Funding Trust securities in March 2006 and October 2007.

Flaherty claimed Washington Mutual directors and officers made misleading statements in connection with those offerings. They asserted fraud and negligence.

In the second settlement proposal filed Aug. 2, the Monterey County, Calif., treasurer and the city of San Buenaventura will receive $4.25 million, paid by the Washington Mutual insurance carriers.

Monterey County and San Buenaventura sued Washington Mutual in 2009, asserting that Washington Mutual directors and officers "engaged in fraud, deceit and negligent misrepresentation" concerning the company's finances and risk management activities when the governments were buying and holding Washington Mutual Bank notes.

A hearing date on the motions is scheduled for 2 p.m. ET on Sept. 6.

In the Wednesday filing, Washington Mutual admits no wrongdoing on the part of its directors or officers. Payment of each settlement would come from insurance policies the company carried on its directors and officers. No money would be paid from the estate.

Washington Mutual, a Seattle-based savings and loan holding company, filed for Chapter 11 bankruptcy on Sept. 26, 2008. Its Chapter 11 case number is 08-12229.

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