Chicago Law Firm Agrees to Pay Up to $34 Million in Lincoln S&L; Case

Sidley & Austin, a Chicago-based law firm that lobbied on behalf of Lincoln Savings & Loan in Irvine, has agreed to pay up to $34 million to settle claims filed against it in several class-action lawsuits.

The firm has agreed to pay $4 million now and guarantee payment of up to an additional $30 million if plaintiffs don’t win any more money from about a dozen other defendants. Nearly 100 individuals and companies have been sued by bondholders of American Continental Corp., the parent firm of Lincoln.

Sources said the settlement by Sidley blocked a similar one with another major defendant. The accounting firm of Touche, Ross & Co., now known as Deloitte & Touche, had tried up until last week to get a similar arrangement, but negotiations stalled over certain issues.

Sidley is the third major defendant to settle charges in the complex civil litigation stemming from the 1989 collapse of Lincoln and Phoenix-based American Continental. The other two, paying a combined total of $25.9 million, also were law firms.

Lincoln’s failure is expected to cost taxpayers more than $2.5 billion, making it the most expensive thrift collapse to date. The failure has prompted numerous lawsuits against former owner Charles H. Keating, other company executives and their professional advisers.

The settlement has no effect on Sidley’s negotiations with the federal government, which has threatened to include it and other law and accounting firms in the pending fraud and racketeering suit against the owners and operators of Lincoln.

American Continental sold more than $250 million in bonds, much of it through Lincoln branches, that are now worthless. The investors accuse Keating and his aides of fraud and the company’s outside lawyers and accountants of negligence and other wrongdoing.

Sidley and one of its partners in Washington, Margery Waxman, were accused of improperly pressuring regulators on Keating’s behalf and taking part in a scheme to conceal information and misrepresent the finances of Lincoln and American Continental. In settling the case, Sidley & Austin did not admit any liability. The settlement also included Waxman.

“Our insurance carrier wanted to settle because the amount of the cash payment ($4 million) was no more than what it would have cost to try the case,” said R. Eden Martin, chairman of Sidley’s management committee. “Given the circumstances--the complexity of the case and the remaining defendants--it appears likely that little, if any, of the guarantee will have to be paid.”

Leonard B. Simon, a bondholder’s lawyer who helped negotiate the settlement, agreed that Sidley would not likely have to pay any of the $30 million guarantee.