August 6, 2011 in Business

Feds end WaMu probe

No charges filed over bank’s collapse in 2008
Associated Press
 

NEW YORK – The Justice Department says it has closed its investigation into the collapse of Washington Mutual without any criminal charges filed.

In September 2008, the federal government seized Washington Mutual’s flagship bank, based in Seattle, and sold its assets to JPMorgan Chase & Co. for $1.9 billion. It was the biggest bank failure in U.S. history.

The Justice Department, the FBI and the Securities and Exchange Commission opened investigations into Washington Mutual’s collapse shortly after, in October 2008.

The U.S. attorney’s office for the western district of Washington, which includes Seattle, on Friday evening issued a statement saying that after an “extensive investigation that included hundreds of interviews and the review of millions of documents,” there were not grounds for criminal charges.

In July, WaMu and other defendants, including investment bank Goldman Sachs & Co. and accounting firm Deloitte & Touche LLP, agreed to pay $208.5 million to investors to settle a class-action lawsuit stemming from the lender’s collapse.

In that settlement, plaintiffs ranging from huge pension funds to small individual investigators accused the company and its banking executives of securities fraud, claiming the bank’s lending standards and practices were misrepresented, questionable business practices were not disclosed and federal financial reports were misleading.

Under the terms of the settlement deal, Washington Mutual and the other defendants did not admit any wrongdoing.

The Federal Deposit Insurance Corp. also filed a civil lawsuit in March against former WaMu CEO Kerry Killinger, ex-Chief Operating Officer Stephen Rotella, and David Schneider, who headed the bank’s home loans division.

The FDIC said the three executives pushed for expansion of risky lending even though they knew or should have known that its loan standards and controls were inadequate.

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