No Funds For Shareholders
Washington Mutual Preliminary Settlement Has No Funds For Shareholders
Carolyn Beeler
03/16/2010
Washington Mutual shareholders might not recover any of the money they lost when the Seattle–based bank went under last year. A $6 billion settlement package announced Friday would only cover a fraction of what's owed to creditors.
J.P. Morgan Chase, Washington Mutual and the FDIC submitted their settlement plan to a bankruptcy court in Delaware on Friday.
A committee that represents shareholder interests was excluded from the negotiations that led up to the announcement. Hans Borst is a shareholder from California who has helped organize efforts to recover lost Washington Mutual holdings.
Borst: "It's a travesty. I mean they should have been involved in those negotiations, and they will be involved, because they're going to object to this settlement, I have no doubt. And in the end it'll be up to the judge."
Borst says people are already writing letters to the court to protest the preliminary settlement. But he knows the proceedings are only in their early stages.
The banks and FDIC announced their plan to a judge, but it still has to go through formal court proceedings before it's made official. Shareholders will also get the chance to weigh in.
Mark Northrup is a Seattle bankruptcy lawyer. He says the case might end up looking like a long courtroom trial.
Northrup: "It's a very large case and there are billions of dollars worth of creditors, and people who have claims against Washington Mutual, I would expect that the confirmation hearing to be complex and lengthy."
But even after everyone gets a chance to be heard, Northrup doesn't think there's much hope that ordinary shareholders will ever see any money.
Northrup: "General shareholders in any company are always at the lowest rung of the payment scheme in bankruptcy, and they typically receive nothing unless there's enough money to pay all general creditors. That typically doesn't happen."
The banks and the FDIC haven't yet outlined where the money in their settlement plan would go. A blueprint for how the funds would be distributed will be submitted to the court later this month.
For KUOW News, I'm Carolyn Beeler.
© Copyright 2010, KUOW
