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Andersen Will Pay $82 Million on S&L Audits : Thrifts: Agreement will settle charges that company negligence contributed to the collapse of Lincoln, other firms.

August 06, 1993|From Reuters

WASHINGTON — The government said Thursday that Arthur Andersen & Co. agreed to pay $82 million to settle charges that negligent audits contributed to the collapse of several thrifts, including Charles H. Keating Jr.'s Lincoln Savings & Loan.

The civil settlement between the nation's biggest accounting firm and the government's thrift bailout agency, the Resolution Trust Corp., is the second largest netted by the thrift cleanup agency from an accounting firm in a case stemming from the savings and loan disaster.

The Chicago-based firm agreed to pay $65 million to help settle charges of negligence and breach of contract involving the 1989 failure of Houston-based Benjamin Franklin Savings Assn.

That amount also covers any future claims involving three failed thrifts and a host of other defunct S&Ls that have yet to be specified.

In a separate settlement, Arthur Andersen agreed to pay a total of $17 million to cover allegations it helped fuel the collapse of Keating's Lincoln Savings & Loan Assn. because of negligent audits.

The 1989 failures of the Irvine-based Lincoln cost taxpayers an estimated $2.6 billion, the most costly thrift failure in the nation's history. Two years ago, Arthur Andersen agreed to pay at least $3 million to settle the Lincoln case. It also agreed that any additional penalty would be levied through arbitration.

The $17-million figure--which includes a $14-million payment on top of the $3 million already paid--resolves the entire Lincoln matter.

The failure of Benjamin Franklin is estimated to have cost taxpayers $976 million.

The RTC had filed a $400-million suit against Arthur Andersen, alleging negligence and breach of contract in the case. The agency charged that losses at the S&L were caused by flawed audits.

Of the $65-million settlement, Arthur Andersen agreed to pay nearly $37 million to cover charges stemming from the Benjamin Franklin case.

The remaining portion covered any future claims tied to three other failed S&LS: University Savings Assn. of Houston, Resource Savings Assn. of Denison, Tex., and HomeFed Bank of San Diego.

The settlement also includes $250,000 set aside to cover a number of unspecified thrifts.

The overall settlement ranks second to the $128 million Ernst & Young agreed to pay the RTC in November of last year. That pact was part of a larger $400-million global settlement involving the RTC and the Federal Deposit Insurance Corp.

In Chicago, Arthur Andersen said in a statement that the accord was the "result of a business decision to resolve all threatened and actual claims."

It said the agreement will be largely covered by the its insurance and that it would not a have material financial impact.

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