BANKING : Legal Fees Still Adding to Taxpayer Pain From Lincoln Savings Fiasco
Among the bills that taxpayers are picking up for the 1989 failure of Lincoln Savings & Loan are the legal expenses--and those were big last year.
The Resolution Trust Corp., which is liquidating the defunct Irvine thrift, spent about $8 million in legal fees last year just in pursuing claims for losses against Lincoln’s operator, Charles H. Keating Jr., and his executives and professional advisers.
The agency also hired 52 other law firms and paid them more than $5 million to help with collections, foreclosures and other matters stemming from the liquidation of the nation’s costliest thrift failure.
Morrison & Hecker, a Kansas City, Mo., firm hired to chase Keating and his advisers through the courts, also is working on RTC lawsuits involving failed Western Savings & Loan in Phoenix and on other RTC matters.
Last year, Morrison & Hecker was the top-earning firm in the bank and thrift clean-up business, picking up $17.9 million for all of its RTC work.
The firm said it is getting cost-effective results.
In just the Lincoln case so far, Morrison & Hecker has recovered more than $150 million in settlements from lawyers, accountants and other professionals and hopes soon to raise the settlement figure to $200 million.
The firm also is taking an RTC case to trial April 12 in federal court in Tucson. It is seeking from $200 million to $600 million from Jones, Day, Reavis & Pogue, a national law firm based in Cleveland. The agency accuses Jones, Day of negligence and aiding Keating in looting Lincoln.
Keating, twice convicted and socked with a $1-billion judgment in lawsuits brought by investors, will be one of four defendants in a later RTC trial. The onetime Arizona real estate developer and lawyer said he is broke and will represent himself in that civil trial.
Keating is serving a 10-year sentence for state securities fraud and faces 525 years in federal prison when he is sentenced May 17 on racketeering, conspiracy and fraud convictions.
Meantime, the Federal Deposit Insurance Corp., which insures both bank and thrift deposits, paid $15 million in legal fees last year--the most for any FDIC-retained firm--to Milberg, Weiss, Bershad, Specthrie & Lerach. The New York firm also represented the investors in Keating’s company in last year’s civil trial, picking up $8.85 million in fees as its first installment.
