May 17, 2006 in Business

Met claimants to split insurance pool

By The Spokesman-Review
 
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Former Metropolitan Mortgage insurance affiliate Western United Life Assurance Co. will press its more than $200 million claim against Metropolitan Mortgage today during a special bankruptcy hearing.

Metropolitan Mortgage & Securities Co. investors would split about $15 million under a settlement announced this week.

The deal, just one small piece in the litigious web of Metropolitan’s bankruptcy, civil and criminal matters, involves money salvaged from an insurance policy that the company purchased years ago to cover the costs of lawsuits brought against executives and board members.

Instead of lawyers consuming the $20.2 million available in the policy through continued litigation, the settlement would split the cash into four basic pools.

About 700 investors who sued their brokers will share about $4.75 million; another $5 million will be deposited into Metropolitan’s bankruptcy account, which is intended to repay all creditors holding debenture bonds; about $4.9 million will be paid to investors who filed a class-action lawsuit; and about $5.2 million will be used to pay the defense costs of executives. Of the $5.2 million going to legal fees, about $2.3 million will be set aside for future costs. If any is left, the remaining money would be sent back to investors.

The settlement also calls for the dismissal of civil complaints filed by investors against all lower-level former Metropolitan executives, including William Smith, Gary Brajcich, Erik Skaggs John Trimble, Reuel Swanson, the estate of Harold Erfurth, and Elaine Hoskin.

Those executives still facing investor-led lawsuits include former chairman and chief executive officer C. Paul Sandifur Jr., former president Thomas Turner,former controller Robert Ness, former chief financial officer William Snider, and former audit committee member and longtime board member Irv Marcus.

Attorney Brad Jones said the settlement has several legal hurdles to clear before it is final, perhaps sometime in the fall. Jones represents investors who filed the class-action lawsuit in early 2004 as the company filed for bankruptcy.

Noting the complexity of the settlement, Jones said it involved more than 700 plaintiffs, 60 brokers who were defendants, 19 former company executives, three banks, three insurance companies, and dozens of lawyers.

Jones said the class action lawsuit would continue against accounting firms and other professionals. Investors say those companies may have — or should have — known about financial irregularities and questionable business dealings that sped the company’s demise and wiped out the investments of more than 10,000 people, many whom are seniors living in the Northwest.


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