It was no accident that federal prosecutors announced the indictment of alleged mortgage loan fraudster Shawn Portmann and three other Pierce Commercial Bank employees Friday morning, sending reporters scurrying for details. That allowed U.S. Attorney Jenny Durkan to subsequently issue a less-noticed release that there would be no indictment for Kerry Killinger and other former Washington Mutual executives. The crackdown on the comparatively small Tacoma bank's failure thus got the public's attention, while the feds' inability to find any wrongdoing in the largest U.S. bank failure in history got passing notice.
The Portmann news release went on for 12 paragraphs, accusing the foursome of funding 270 questionable loans, 100 of which have defaulted, leading to $10 million in losses. Quoted at length were Laura M. Laughlin, Special Agent-in-Charge of the FBI Seattle office; Wayne North, Special Agent in Charge of HUD's Office of Inspector General; Marcus Williams, the IRS Special Agent in Charge of the Pacific Northwest; and Durkan.
They called the Tacoma bank "an unscrupulous goliath" who participated in "a modern day plague." Williams said "Washington residents can rest assured knowing that federal law enforcement takes mortgage fraud seriously" and Durkan trumpeted that "Portmann and his co-conspirators are being held accountable for their criminal conduct that was fueled by greed."
But CEO Killinger and his WaMu co-horts Stephen Rotella and David Schneider, the men in charge when billions of risky loans were lent that eventually brought on the massive failure? No one wanted to talk about them. The U.S. press release announcing that the WaMu criminal investigation was kaput ran all of three paragraphs, with nobody's names attached. Durkan, asked for comment by the Times, refused.
Killinger and his attorney had no comment either. But, as they say, money talks. Though Killinger is no longer being investigated as a bandit, he seems to have made off like one. When fired in 2008, Killinger took home $25.1 million in compensation that year, including a $15.3 million golden parachute. Over the previous five years, as the bank began its slide to oblivion, he earned $103 million in cash, stock, and options.
Where this leaves the feds now is with a civil action, filed in March by the Federal Deposit Insurance Corp. seeking $900 million in damages from Killinger and the others - alleging they were, at the least, negligent in their failed operation of WaMu. They are accused of taking "extreme and historically unprecedented risks with WaMu's held-for-investment home loans portfolio. They focused on short-term gains to increase their own compensation, with reckless disregard for WaMu's longer-term safety and soundness."
Yet, there have been settlement talks in that lawsuit, and Killinger et al are now asking a judge to dismiss it. Given the federal track record on subprime mortgage actions, there is the likelihood that, on some future late Friday afternoon at the end of the weekly news cycle, there will be three more paragraphs to end this story.
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