Sterling Wins Key Court Ruling
Sterling Savings Corp. will take its bid for as much as $90 million in damages against the federal government to the U.S. Court of Claims, officials at the Spokane thrift said Wednesday.
The way was cleared for continued action in the case by U.S. District Court Judge Justin Quackenbush who, ruling from the bench, Friday granted Sterling’s request for transfer of jurisdiction to the claims court.
A written order is expected today.
The Office of Thrift Supervision and Federal Deposit Insurance Corp. had sought to block the move, and asked the court to dismiss the five-year-old claim.
Sterling and the regulators have been locked in litigation since 1990, when the thrift obtained an order from Quackenbush forestalling a potential takeover.
That ruling was appealed to the 9th U.S. Circuit Court of Appeals, which in 1992 found the Court of Claims was the proper forum for the case. But action was stayed while similar lawsuits proceeded.
Last week, a decision by the Federal Circuit Court of Appeals gave Sterling’s claim a major boost.
Ruling 9-2, the court said the federal government had violated contracts with Glendale Federal Bank of California.
Glendale, like Sterling, had taken over several failing thrifts during the 1980s in return for “regulatory goodwill,” a bookkeeping measure that boosted the assets of the surviving institution.
But legislation enacted by Congress in 1989 wiped out the goodwill credit, threatening the financial well-being of dozens of thrifts suddenly short of required capital. Several failed.
Sterling, given court protection, raised additional capital by selling stock.
But the thrift’s officials estimate the OTS and FDIC owe Sterling $90 million; $30 million in goodwill credits, the remainder representing money the government saved because Sterling took over the ailing institutions.
Glendale, by comparison, will seek $1.5 billion, and industry observers project the eventual cost of all claims could be in excess of $15 billion.
Sterling Chairman Harold Gilkey, while expressing satisfaction with the progress the aggrieved thrifts are making in court, cautioned that the amount of damages that may be awarded remains uncertain.
“It’s unfortunate that the government has neglected to protect the interests of the U.S. taxpayer by not taking the appropriate actions to negotiate a settlement,” he added.