WASHINGTON -- The timing for the payout of about $900 million in settlement proceeds from the Washington Public Power Supply System bond fraud trial remains difficult to predict, lawyers for bondholders have acknowledged.
Because of pending appeals tied to the litigation, "it is impossible for us to tell you when the proceeds of the settlements will be distributed," lawyers for class action plaintiffs said in a letter sent to claimants late last month.
Two-and-a-half years have passed since the trial over the $2.25 billion WPPSS nuclear power units 4 and 5 bond default ended. Out-of-court settlements cut the trial short in December 1988, after three months of testimony. Defendants in the case, including several Northwest utilities, the Bonneville Power Administration, underwriters, and engineering firms, paid the settlements.
Lawyers in the case said last summer that distribution of the proceeds would occur in mid-1991 at the earliest.
But some disgruntled bondholders have appealed U.S. District Court Judge William D. Browning's decision to approve certain settlements in the case. Arguments on those appeals were presented Feb. 7 before the U.S. Ninth Circuit Court of Appeals, and a decision is expected sometime this summer.
The class action lawyers' letter noted that "those rulings may lead to further appeals," which could delay settlement distribution even more.
Another decision is pending on Judge Browning's award of attorneys' fees and expenses in the case. Lawyers had asked the judge to reconsider his decision to cut their fee and expense petition to $32.4 million, from the $102 million sought by the lawyers. Judge Browning heard reargument on Feb. 11.
Once again, the lawyers' letter observed that "appeals may be pursued after such rulings are made."
Melvyn I. Weiss, one of the lead class action lawyers, said yesterday that "the endgame is so disturbing" after the various trial participants managed to negotiate an end to the complex case. But he noted that "we can't tell the judges what to do" and added that "I'm not a good prognosticator" of when rulings might be forthcoming."
Under the settlement allocation plan approved by Judge Browning, the bulk to proceeds will be given to two groups of class action bondholders who bought their WPPSS units 4 and 5 bonds before June 15, 1983, the date on which the Washington State Supreme Court ruled that the local utilities' promises to repay investors were invalid. That ruling prompted the default.
Investors who purchased the bonds after that 1983 ruling will receive an estimated $140 million of the settlement pot. But those investors -- known as the late buyers or speculators -- are among the bondholders appealing the settlement allocation. Among other things, they argue that the settlement agreements improperly bar them from pursuing their claims in other courts. They also have said thei amount of recovery is inadequate.
Chemical Bank, the bond trustee for WPPSS unit 4 and 5 bondholders, also is pursuing a separate lawsuit alleging that more than $400 million of costs were misallocated to units 4 and 5, instead of to their respective twinned plants, units 1 and 3.
Judge Browning has granted a stay of the case pending action on an appeal of his decision regarding accounting methodology. Judge Browning ruled last fall that principles akin to those espoused by Chemical Bank should have governed expense allocation under the bond resolution. Certain Pacific Northwest utilities and the Bonneville Power Administration have appealed that finding.
Any judgment in the case would be distributed to all current unit 4 and 5 bondholders, regardless of when they purchased their bonds.
