May 23, 2010 in City
Settlement squeezes out a bit more Met money
Former leader Sandifur, other executives included in latest deal to pay back investors
C. Paul Sandifur Jr., the former chairman and chief executive officer of Metropolitan Mortgage & Securities Co., will pay $23,000 to investors in the bankrupt company as part of a class-action settlement reached with executives.
It’s the last money expected to be paid out by the former CEO, whose father founded the Spokane company in the 1950s.
Metropolitan grew into a $2.3 billion financial conglomerate under the younger Sandifur, with thousands of investors and more than 600 employees. It collapsed into bankruptcy in 2004 amid an accounting scandal. Investors lost more than $600 million, making Metropolitan the biggest corporate failure in Spokane’s history.
Sandifur, who was never charged with a crime relating to Metropolitan’s failure, paid $150,000 last year to settle fraud allegations made by the U.S. Securities and Exchange Commission. The SEC will award that money to investors.
Four other former Metropolitan executives also agreed to pay a total of $45,000 in this latest settlement: Irv Marcus, a former director; Robert Ness, former company controller; William Snider, former chief financial officer; and Thomas Turner, a former president convicted by a federal jury of lying to auditors.
Combined, the settlement and SEC money totals $218,000. If approved by a federal judge, the money would be folded into a larger $38 million settlement with major accounting firms and others announced three months ago to settle the class-action claims. Payouts could be mailed this fall, said Bradley Jones, a Tacoma lawyer leading the case that was filed in U.S. District Court in January 2004.
The settlement includes no admission of wrongdoing by the former Metropolitan officers and directors.
Attorneys, who pieced together the larger class-action suit starting in January 2004, will be awarded fees by U.S. District Judge Fred Van Sickle. Fees in such cases are typically between 25 and 33 percent of the total.
The settlement will not benefit every investor who lost money on Metropolitan.
Court rulings narrowed the class-action case to these affected investors: those who bought Metropolitan bonds – also called debentures – after May 2002; those who bought preferred shares of Metropolitan stock after August 2002; and those who bought Summit Securities bonds — Metropolitan’s Idaho affiliate — after February 2002.
Investors who may be members of the class will receive an accounting of their investment in a special mailing over the summer. These individualized statements will provide details about the settlement. These investors can expect to recover between 16 and 20 cents on the dollar of their principal.
When members of the investor class action receive those mailings – and if they don’t have any objections – they don’t have to do anything to receive money. They will be automatically included in the settlement.
The 16-to-20-cent recovery through the settlement is separate from Metropolitan’s bankruptcy, which has also made payments to investors.
For decades Metropolitan billed itself as a safe investment haven. One advertising campaign even compared buying unsecured Metropolitan bonds to purchasing a federally insured certificate of deposit from a bank.