CalFed to Appeal $23-Million Award in Case Against U.S.

A judge has ordered the federal government to pay $23 million to California Federal Bank and the government’s lawyers couldn’t be happier.

CalFed, the nation’s second-largest savings and loan, was seeking more than $1.5 billion in one of about 125 pending breach-of-contract cases filed by thrifts that were hurt when Congress changed some accounting rules during the S&L; crisis a decade ago. Two weeks ago, another judge had awarded Glendale Federal Bank $909 million in a similar case, and some plaintiff attorneys were predicting a torrent of hefty judgments.

The relatively paltry award in the CalFed case was a blow to the thrifts, and a vindication for Justice Department lawyers. The department has been criticized for refusing to soften its aggressive litigation strategy after the Supreme Court ruled in 1996 that the government broke its contracts with the thrifts, but officials say they have an obligation to keep fighting cases that could cost taxpayers as much as $32 billion.

“We are very pleased with the result and that the court has agreed with our position,” Assistant Atty. Gen. David W. Ogden said.

CalFed, which has since merged with GlenFed parent Golden State Bancorp, said it plans to appeal Friday’s decision by Judge Robert Hodges Jr. of the U.S. Court of Federal Claims. The bank complained in a statement that the decision “comports neither with applicable law nor with the extensive evidence and testimony presented at trial.”

The cases stem from a 1989 law eliminating “supervisory goodwill,” an accounting quirk by which federal officials had granted healthy thrifts a break from reserve requirements to encourage them to take over failing thrifts.