I am currently reading with interest Sheila C. Bair's book, "Bull By The Horns". It is a description of the time spent in office by the Federal Deposit and Insurance Corporation's former Chairman, written by the Chairman herself to describe her office. During her tenure, which ended on or about July 6, 2009, much of the Financial Crisis exploded on our economy.
While I am reading Ms. Bair's account of her tenure, reports have surfaced concerning secret FDIC settlements made on her watch with Directors and Officers who allegedly caused or contributed to the cause of the Great Financial Fiasco. In apparent violation of Federal law, the FDIC agreed to keep the settlements secret unless a specific request was made for disclosure of that particular settlement. See, e.g., E. Scott Reckard, "FDIC Begins to Reveal Settlements Related to Financial Crisis" (Los Angeles Times Online, posted March 19, 2013); William K. Black, "Business Blog / Which Aspect of the FDIC's Litigation Failures is The Most Embarrassing and Damaging?" (Huffington Post, posted March 12, 2013). Reportedly, Ms. Bair was leading the FDIC "when most of the settlements were completed". See Scott Reckard, Los Angeles Times, supra.
Sheila Bair does not mention the fact of FDIC settlements with Directors and Officers of failed banks in her book, let alone that the FDIC agreed to keep them secret, or at least I cannot find any mention of them in her book. We shall now, perhaps, all hear her side of the story soon.
In response to a recently published newspaper report in the Los Angeles Times, the FDIC has begun posting information concerning its previously secret settlements on its web site. The documents will be posted in increments. As of March 29, 2013, the initial postings consist of about 45 sets of documents (not simply individual settlements, but in some cases, groups of settlements). They are collectively labeled by the FDIC as "Professional Liability Agreements by State Since 2008". The FDIC site also contains a list of 53 "Professional Liability Lawsuits" filed by the FDIC against "officers and directors, attorneys, accountants, appraisers, brokers or others" and "fidelity bond carriers and title insurance companies," between July 2, 2010 and March 7, 2013.
Examining the 45 pdf's posted to date will take awhile. If I find anything 'newsworthy' in them, I will post my reviews of these settlement documents as I am able to complete my reviews. In the meantime, the settlement which has attracted the most popular interest at the present time is the December, 2012 settlement between the FDIC and Michael Perry, who was CEO of failed IndyMac Bank located in California. IndyMac's failure "cost the [FDIC] $13 billion -- the biggest loss in its 80-year history." Scott Reckard, Los Angeles Times, supra. [Emphasis added.]
The FDIC reportedly secretly settled its claims against Mr. Perry for his agreement to personally pay $1 Million, plus an agreement by Mr. Perry not to engage in the banking industry (for awhile, at least) and also with provisions guaranteeing the FDIC's pursuit of IndyMac's "liability insurers" for $11 Million more. Professor William K. Black, Huffington Post, supra.
The Perry settlement was so good that it was announced in EMails sent to news organizations -- reportedly by Mr. Perry's lawyers, not by the FDIC. The terms of this particular settlement were therefore public knowledge in December, 2012 when the settlement was reached between Mr. Perry and the FDIC. See Kevin LaCroix, "IndyMac CEO Settles FDIC's Failed Bank Suit" (The D & O Diary, posted December 17, 2012).
In contrast, one alleged seller and/or deliverer of Mortgages to IndyMac Bank, Quicken, agreed to pay 6.5 times as much money, or $6.5 Million, to settle the FDIC's claims against it, and "[w]ithout admitting liability". (See the 65th page in the 230 page pdf labeled, "IndyMac2", among the FDIC's "Professional Liability Settlement Agreements by State Since 2008".)
On the whole, it seems less expensive to be a failed CEO than it does to be a failed Mortgage 'seller and/or deliverer'. On the whole, as well, there are many legal entanglements with secret settlements that make these agreements unwise, and the price of keeping them secret exorbitant. This is a good rule of thumb to follow when making all types of insurance settlements, it seems: As a general rule at least, keep them open and transparent. See generally DENNIS J. WALL, 1 LITIGATION AND PREVENTION OF INSURER BAD FAITH § 3:107, "Settlement of Third Party Bad Faith Claims: Confidentiality (protected) or Concealment (Void)" (West Third Edition; 2013 Supplement in process); 2 id. § 9:28, "Settlement of First Party Bad Faith Claims: Confidentiality (Protected) or Concealment (Void)".
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