Expenses for Suing Keating, Associates Hit $17.8 Million
The civil case against Charles H. Keating Jr. and his cohorts at failed Lincoln Savings & Loan was staggering in its scope.
So, too, are the legal bills to recover more than $250 million in settlements.
It’s not just the lawyers’ fees--more than $46.8 million shared by 18 law firms--but the costs of bringing the litigation that boggle the mind.
A federal judge in Tucson approved some expenses Monday that bring the total costs of suing Keating and his crew to $17.8 million, or about 7% of the total amount recovered in settlements.
The expenses cover items such as transcripts, photocopying, court costs, mail and messenger services, travel, telephone calls and depositions, according to a court document.
The single biggest expense was $7.7 million paid for expert witnesses to assess the actions of Keating and other defendants and the damages to the small investors, most of whom were elderly Southern Californians who bought bonds in the Irvine thrift’s parent company, American Continental Corp. of Phoenix.
Lincoln is one of the nation’s costliest thrift failures, leaving taxpayers with a $2.6-billion cleanup bill.
The civil case was no easy task. Nearly 100 defendants--from Keating and the national accounting and law firms that advised him to borrowers and local appraisers--were sued on allegations that ranged from simple breaches of duties to racketeering.
Small investors won $1.5 billion last year in a trial. But the few defendants who had not settled were bankrupt or without funds. They included Keating, who has been convicted of fraud in state and federal courts and is serving prison terms totaling more than 12 years.
Without objections, U.S. Dist. Judge Richard M. Bilby on Monday approved payment of $3.9 million in costs from some of the money remaining out of $190.5 million that has been collected so far in settlements.
Most of the settlement money received already has been spent: $118.2 million to small investors, $46.8 million for attorney fees, $14 million for litigation costs, $1.5 million for taxes.
The court document also lowers the estimated total recovery to $251.5 million, but a court clerk said that figure should rise by $20 million. Lawyers for small investors have said the total would be $272 million.
The extra money is coming from settlements in which the American Continental case is one of more than a dozen others filed against bankrupt brokerage Drexel Burnham Lambert Inc. and its onetime junk-bond pioneer, Michael R. Milken.
So far, bondholders, the largest segment of American Continental small investors, have recovered nearly 50 cents on the dollar, and that measurement is perhaps more meaningful in a case that makes $1 million seem like pocket change.
