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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Deal would free millions in Met funds

A proposed legal settlement involving former board members of a Metropolitan Mortgage affiliate would free millions of dollars to be returned to investors and release the directors from lawsuits and allegations that they took part in a massive financial fraud.

The deal would pull $7.25 million from an insurance pool now being tapped to pay attorney fees for former Metropolitan officials. The money would be split among a trust set up to recover and repay money to creditors in the bankruptcy case, and investors who filed a class action lawsuit against the company and its officials.

Every board member of Summit Securities, with the exception of former company president Tom Turner, is included in the settlement. Turner, indicted last month on seven felony counts of misleading auditors of the company, remains a target of investors.

The board members that would be part of the settlement include Robert Potter, Clayton Rudd, James Hawkins, Greg Strate and Philip Sandifur.

The men, said class action attorney Brad Jones, were among the least culpable of all officials caught up in the financial collapse that has stripped 10,000 investors of about $460 million.

One former board member of Metropolitan, Samuel Smith, also settled. Smith, former president of Washington State University, was the lone outside member of Metropolitan’s board of directors.

The other Metropolitan board members, along with executives and other key employees, are still named in lawsuits.

Settlement papers were filed Monday afternoon. The agreement needs the blessing of creditors and U.S. Bankruptcy Judge Patricia Williams, along with class-action plaintiffs and U.S. District Judge Fred Van Sickle.

Attorney Parker Folse, who is pursuing claims on behalf of Metropolitan’s creditors, said it will take months for the settlement to be final.

One reason is that it comes with a catch: the board members involved want the deal to resolve their legal exposure.

As Metropolitan and class action attorneys press claims against auditing firms and others, cross claims could threaten to drag the Summit board members and Smith back into the fray. They want a judge’s order barring any further legal action against them included in any settlement deal.

Folse and Jones said the board members affected by the deal were not enriched by serving as Summit directors. They characterized the settlement as the best way to slow the drain on the insurance pool, now estimated at about $15 million.

Defense lawyers have already been paid $722,000 from the pool. Metropolitan wants to collect another $3.1 million from the pool as reimbursements for the work it performed complying with federal investigations and other legal costs.