FCA Settlement Plan to Let Knapp Keep $2-Million Payment
Charles W. Knapp, former head of Financial Corp. of America, will get to keep his controversial $2-million severance payment under a proposed settlement to end litigation against the now-bankrupt savings and loan holding company.
Knapp received the severance pay after federal thrift regulators ousted him as FCA chairman and chief executive in 1984 in the midst of a deposit run. He received the payment from FCA’s board in return for his agreement to resign, but FCA later sued to recover the money on the grounds that it was grossly excessive.
The proposal to drop the claim against Knapp was part of a settlement agreement disclosed Monday in which FCA will receive $51.9 million from Arthur Andersen & Co., the Federal Savings & Loan Insurance Corp. and International Insurance Co. The money will be used toward settling suits and claims filed by FCA’s former stockholders, bondholders and creditors.
Arthur Andersen is FCA’s former auditor while International Insurance provided the liability insurance policy for the company’s former officers and directors. The FSLIC got involved in litigation settlement talks after it placed FCA’s operating subsidiary, American Savings, into receivership last September.
FCA is now being liquidated by bankruptcy trustee David A. Gill. He filed the settlement in bankruptcy court in Santa Ana, where FCA is seeking to liquidate under Chapter 7 of the U.S. Bankruptcy Code. The proposed settlement now must be approved by the bankruptcy court and federal court in Los Angeles, where several shareholder lawsuits are pending.
The claim against Knapp, now an investment banker in Los Angeles, will be handled by International Insurance, said Richard K. Diamond, Gill’s attorney.
Unit Sold to Bass
Knapp’s attorney, Arthur N. Greenberg, confirmed the agreement, saying Knapp won’t pay anything to settle the suit.
Until a few years ago FCA was the nation’s largest savings and loan company, with assets of more than $32 billion, but began a tailspin five years ago because of heavy losses on real estate development loans. American Savings was sold last December to Texas investor Robert M. Bass.
Much of the litigation involving FCA was filed by angry shareholders who saw their investments virtually wiped out by the receivership. Among their charges were that FCA’s management improperly speculated in the company’s stock and paid improper bonuses to directors and officers to meet margin calls on FCA stock, according to the settlement papers filed Monday.
FCA, under the new management that replaced Knapp, also sued Arthur Andersen in 1986, charging the accounting firm with being negligent in its role as FCA’s outside auditor from 1974 to 1983. That suit will be also be settled if the proposed agreement is approved.
