YOU ARE HERE: LAT HomeCollections

Heritage Case Over Hurdle With FDIC's Tentative OK

December 16, 1987|JOHN O'DELL | Times Staff Writer

In an action that could bring to an end the costly litigation triggered by the liquidation of Heritage Bank of Anaheim in 1984, the Federal Deposit Insurance Corp. has tentatively agreed to accept about $10 million in insurance payments to settle its $154-million negligence suit against 13 former officers and directors of the defunct institution.

The settlement, if a final agreement is reached in the next few weeks, is also expected to result in the withdrawal of a $54-million federal court suit brought against the FDIC by Heritage founder and former Chairman Douglas Patty.

Henry Rossbacher, a private attorney whose firm represents the FDIC in its suit, said the settlement, if signed, would end virtually all litigation and would represent "a major recovery."

He vehemently denied claims by attorneys for several of the defendants in the case that the FDIC's legal bill in the three-year suit will all but consume the proceeds of the settlement.

According to several of the attorneys involved in the settlement talks, National Union Fire Insurance--which had underwritten directors' and officers' liability insurance for the bank--has agreed to pay about $8 million to settle negligence claims.

The attorneys asked to remain unidentified.

But they said that, in addition to the National Union payment, several other insurers reportedly will pay about $2 million to settle claims against a number of companies, controlled by former Heritage directors, that were named in the FDIC's suits as contributors to what officials alleged was a systematic draining of the bank's resources.

Heritage, which ranked as Orange County's largest independent bank during its heyday in 1982, was declared insolvent and closed by federal regulators in March, 1984.

The bank had assets of about $150 million when it was seized, including at least $50 million in bad loans, regulators said.

In March, 1985, the FDIC filed a civil fraud lawsuit accusing Patty and other former directors and officers of manipulating the bank's stock price while concealing its shaky financial status.

Los Angeles Times Articles