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FDIC Sues Former WaMu Execs and their Spouses

Source: The Street, WSJ

Posted on 18 Mar 2011

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The Federal Deposit Insurance Corp. (FDIC)  is suing three former executives of Washington Mutual Bank and their wives for $900 million.

The Wall Street Journal reported that the charges are being pursued against former WaMu CEO Kerry Killinger and his wife Linda; former COO of the bank Stephen Rotella and his wife Esther; and the former president of home loans for WaMu, David Schneider. Schneider is now employed by J.P. Morgan Chase.

Mr. Killinger attacked the lawsuit as "baseless and unworthy of the government," according to a statement from him. "The factual allegations are fiction." Mr. Killinger also criticized federal regulators who, he said, had reviewed the bank's financial position and "had offices on the premises '24/7'" in the months leading up to the bank's collapse.

In a statement, Mr. Rotella said "it is almost beyond belief that the FDIC would take action against an effective, hard working bank manager who performed well under extraordinary conditions in an effort to save an important financial institution."

Mr. Rotella statement added that the FDIC's investigation "lacks credibility and is unfair, since it has flatly refused Mr. Rotella's offer to meet, answer their questions, and explain his role as Chief Operating Officer at the company.

Furthermore, it is patently unfair for the FDIC to expect an individual to have perfect foresight into a crisis that the FDIC itself did not see coming."

The other defendants couldn't immediately be reached for comment Thursday. A J.P. Morgan Chase spokeswoman declined to comment and said Mr. Schneider also declined to comment.

The WaMu suit is the FDIC's highest-profile action against bank executives for alleged wrongdoing during the financial crisis. As of March 15, the FDIC had authorized the filing of lawsuits seeking to recover $3.57 billion from 158 officers and directors at failed banks.