WaMu's directors still sit on many boards
Washington Mutual's directors, responsible for keeping tabs on CEO Kerry Killinger, COO Stephen Rotella and the other top managers who led WaMu down the path to ruin, experienced little fallout from the banking giant's failure.
By Seattle Times business staff
It was exactly three years ago Sunday that Washington Mutual, crippled by bad mortgages and fleeing deposits, was taken over by federal regulators who then sold the Seattle-based banking giant for parts.
Which made us wonder: Whatever happened to WaMu's directors, those responsible for keeping tabs on CEO Kerry Killinger, COO Stephen Rotella and the other top managers who led WaMu down the path to ruin?
Not much, it turns out.
A look at 15 men and women who sat on WaMu's board between 2002 and 2008 — the period in which the thrift's so-called "high-risk lending strategy" was crafted, launched and then peaked and imploded — suggests that none experienced any fallout from their WaMu experience.
Consider, for instance, retired Southern California Edison chairman and CEO Stephen Frank, who took over as WaMu chairman in mid-2008 after Killinger was ousted from that post.
Frank continues to serve as WaMu's board chairman, though the board doesn't have much to do since the company has been in bankruptcy for three years. He also sits on the board of Northrop Grumman, where he chairs the audit committee.
Five months after WaMu's collapse he was elected to a three-year term on the board of NV Energy, parent of Nevada Power and Sierra Pacific Power. He also serves on various nonprofit boards, including the Los Angeles and Reno philharmonics.
Orin Smith, Starbucks' former CEO, joined WaMu's board in 2005, a year after joining Nike's board and a year before joining Disney's. Smith still serves on all three boards; he chairs Nike's finance committee and Disney's audit committee. In 2009, Gov. Chris Gregoire appointed Smith to the University of Washington's Board of Regents; his term there runs to 2015.
Thomas Leppert, a former construction-company executive, was on WaMu's board from 2005 until he resigned in October 2009. Leppert was mayor of Dallas for not quite four years, and now is running for the U.S. Senate.
Mary Pugh, who resigned from the board in April 2008 after receiving heavy criticism from shareholder activists, is still CEO and chief investment officer of Pugh Capital Management, a fixed-income investment firm in Seattle. She's also on the board of the Seattle Foundation, where she chairs the investment committee, and is a trustee of Seattle Academy of Arts & Sciences, a private school in the Capitol Hill neighborhood.
Anne Farrell also resigned from WaMu's board in 2008, after reaching the mandatory retirement age, but she still has plenty to do. Last year she was re-elected to her fourth three-year term on REI's board, where she chairs the nominating and governance committee; she's also on the boards of the UW Foundation and public-television station KCTS.
(KCTS board meetings must be interesting: Other directors include Douglas Beighle, who was on WaMu's board from 1989 to 2005, and Linda Killinger, the ex-CEO's wife.)
And so it goes. WaMu's unraveling seems to be little more than an unfortunate footnote in the careers of its current and former directors.
The one cloud on that otherwise sunny scenario was the massive class-action lawsuit against 13 of the former directors, along with Killinger and six of his top lieutenants, accounting firm Deloitte & Touche and a passel of investment banks who sold WaMu securities.
But that suit was settled over the summer for $208.5 million, and WaMu's insurance will pay the $105 million that comprises the directors' and executives' share.
— Drew DeSilver: ddesilver@seattletimes.com
Beyond the reach
of litigation
From the Shutting the Barn Door Department: Earlier this month, the federal government included 23 former WaMu employees in a massive lawsuit over mortgage securities bought by Fannie Mae and Freddie Mac during the housing bubble.
The suit accused those individuals of signing off on documents containing false or misleading information that were used to sell billions of dollars' worth of mortgage-backed securities.
But one of the defendants, Thomas R. Green, likely won't be responding to the suit: He died in 2006.
Green was named in the suit because, in his capacity as chief financial officer of WaMu Asset Acceptance Corp. in the mid-2000s, he signed registration papers for more than $3.9 billion in securities backed by WaMu mortgages that were bought by Fannie and Freddie. Those documents, the government alleges, drastically overstated the quality of the underlying home loans.
— Drew DeSilver
WaMu ruling
makes waves
A federal bankruptcy judge's ruling against WaMu's proposed reorganization plan is making waves in the arcane world of bankruptcy law.
On Sept. 13, Judge Mary Walrath denied confirmation of WaMu's sixth amended plan, even though it addressed several concerns she had raised earlier, in part because of insider-trading allegations against four hedge funds. (There was also the issue of whether post-petition interest awarded to certain creditors would be paid at the statutory or contractual rate, which gives you a taste of how abstruse bankruptcy law can be.)
The hedge funds had bought up large amounts of WaMu debt. As WaMu was negotiating a "global settlement" of the billions of dollars in crisscrossing claims between itself, JPMorgan Chase and the FDIC, the hedge funds participated in the talks to varying degrees.
That in itself is not necessarily suspect: Since the hedge funds were major creditors of the bankrupt company, their approval would be needed for any eventual reorganization plan, so it made some sense for them to be part of the process early on.
But when the funds resumed trading in WaMu debt during breaks in the talks, other stakeholders — notably the committee representing common shareholders — cried foul.
Actually, they cried insider trading, arguing that the funds used information they gained in the talks to buy up WaMu debt on the cheap, because they knew there was a good chance there'd be enough money in the bankruptcy estate to pay it off in full.
The funds said, in essence, that they didn't get much "material" information from the talks, and that when they did, they obeyed confidentiality agreements and lockup periods.
Walrath didn't rule on the merits of the insider-trading claim, only that the objectors had enough to try to get the hedge funds' claims reduced or disallowed. But some bankruptcy lawyers say her reasoning, if picked up by other judges, is enough to chill the trading in bankruptcy claims or keep such traders out of settlement talks altogether.
"The shrinking of the universe of negotiation participants could make it difficult to craft a plan the debtor could be confident would succeed due to an inability to find a critical mass of creditors with whom to negotiate," the Davis Polk & Wardwell firm said in a memo.
"Having to guess at what creditors will vote to support could lead to an inefficient and drawn-out plan process, prolonging case duration and expense."
Given that the WaMu bankruptcy marks its three-year anniversary Monday, one shudders to think that it could be even more "inefficient and drawn-out."
seattletimes.nwsource.com/html/sundaybuzz/...sundaybuzz25.html
Zurück
Weiter
Werbung
