Group in Keating Case May Fare Better Than Most Bondholders : Settlements: The investors, most from the Valley, decided against class-action lawsuits and are expected to recover most of their money.
Nearly 100 small investors, who held back from joining class-action lawsuits filed on behalf of the thousands of investors who lost money in the collapse of Charles H. Keating Jr.’s financial empire, can be glad now they went their own way.
The investors, mostly from the San Fernando Valley, filed a conventional lawsuit instead and now stand to recover 85% of their money--far more than the 40 cents on the dollar that 23,000 other bondholders will receive from the class-action suits.
“I consider us very lucky,” said Alan H. Yahr of Sherman Oaks, who sought lawyers to take on a conventional case and helped bring into the lawsuit 98 others who had purchased American Continental bonds.
“I can’t imagine anyone in our group not being happy with the outcome,” he said. “From what I understand, we’re going to end up better than the class, and we’ve got money well ahead of the class.”
The small group contended in the lawsuit that each was defrauded by Keating and 26 others involved with American Continental Corp. and its Lincoln Savings & Loan subsidiary.
On Friday they are expected to get court approval of settlements with the last four defendants sued, giving them a total of $4.4 million. After attorney fees and court costs, they will end up with 85% of the $3.6 million in principal lost when the Phoenix company and its Irvine thrift collapsed in April, 1989--one of the biggest financial disasters of the decade.
Lincoln was the nation’s biggest savings and loan failure, costing taxpayers $2.6 billion. And American Continental’s bankruptcy wiped out $288.7 million in investments by minority shareholders and bondholders.
U.S. District Judge Richard M. Bilby in Tucson is scheduled to rule Monday on disbursing $153 million, the first batch of settlement money to be given to plaintiffs in the class action.
Future payouts to those who joined in the 15 class actions are unlikely to reach the 100% recovery that their lawyers have often promised, even though the lawyers won jury verdicts totaling $4.4 billion in July against Keating and three others. Keating is broke and in prison, and two other defendants are bankrupt. The fourth is a foreign company unlikely to pay much.
The Valley investors and their lawyers, from the Beverly Hills firm of Cooper, Epstein & Hurewitz, long labored in the
shadow of the massive, complicated class actions and the national reputations of the class-action securities lawyers.
At times, class-action lawyers took swipes at the little lawsuit. At a meeting of several hundred bondholders in Van Nuys, a class-action lawyer “made some sort of snide comment about our lawsuit, as if it were meaningless and we didn’t know what we were doing,” Yahr said.
But Thomas L. Taylor, the lawyer who spearheaded the court effort for the 99 bondholders, said his relations with class-action lawyers were cordial.
“We’re very, very pleased with the way the litigation developed,” Taylor said. “This is not the course to take in every class action, but it worked out very well for our clients, particularly since many were very elderly.”
A conventional lawsuit, filed on behalf of individuals for separate wrongs against them, would not work for all 23,000 investors. That’s why class actions were instituted. But small groups of plaintiffs nevertheless can sometimes achieve what the class actions cannot.
From the start, Yahr, who is a criminal defense lawyer, and the Cooper, Epstein team were concerned with getting back as much money as quickly as they could because most of the bondholders were elderly people living off the interest from their American Continental investments.
Yahr, especially, was worried that plaintiffs have little or no control over lawyers in class actions. The huge class-action verdicts are meaningless, he said, because the bondholders won’t get much of that money--and might die before it is distributed.
