The government's long-running regulatory goodwill battle with Glendale Federal Bank may finally be coming to a close. The Justice Department is expected to wrap up its case by April 3, and the judge has promised to decide by July how much, if anything, the government must pay for breaking its promise to let the thrift count regulatory goodwill as capital for up to 40 years.

Glendale is the first of nearly 120 existing and defunct thrifts that filed suits after lawmakers eliminated regulatory goodwill in the 1991 thrift bailout law. The thrifts are seeking more than $20 billion in damages; Glendale alone wants nearly $2 billion.

Originally scheduled to last less than two months, the Glendale trial has dragged on for more than a year. At issue is whether the loss of regulatory goodwill contributed to the thrift's enormous losses and near failure in the 1980s. If it did, then Glendale may be entitled to recoup the losses, plus the amount it could have earned if it had invested the profits in the business.

The government has argued that the loss of goodwill actually saved the thrift cash because it was forced to get out of money-losing investments before the losses became substantial.

Last summer Chief Judge Loren A. Smith of the Federal Claims Court, who is presiding over the trial, urged the government to settle, saying Glendale had presented an extremely strong case. The judge repeated those comments in the fall. The Justice Department has conceded that some failed thrifts had valid regulatory goodwill contracts with the government, but it has steadfastly refused to admit that these thrifts are entitled to damages.

Judge Smith, however, has not given up hope for a settlement. On March 3, he set up a formal alternative dispute resolution system, to try to settle at least some of the 120 pending cases.

The parties now have 50 days to work with Judge Lawrence S. Margolis to ink a deal. "The court expects the parties to negotiate in good faith and, it is hoped, develop a settlement framework or structure which all the parties may agree," Judge Smith said in the order. "While the challenge is daunting, it certainly is feasible if each party is committed to the goal of resolving these cases efficiently."

Plaintiffs' lawyers welcome the initiative. "We are going to pursue this latest effort of the chief judge," said Charles J. Cooper, a partner at the Washington law firm Cooper, Carvin & Rosenthal, who represents several defunct thrifts, including Statesman Group. "We hope it will yield something positive and provide some fruits where all previous efforts have failed."

"Obviously he is very interested in trying to save the taxpayers and the court a lot of time and expense," said Ronald Stevens, a partner at the Washington law firm Kirkpatrick & Lockhart, who represents Glendale. "He thought the alternative dispute resolution format would achieve that."

A Justice Department spokesman did not return calls for comment.

Judge Smith is also preparing to proceed on the remaining cases if his arbitration effort fails. For instance, he has scheduled a trial for May 11 before Judge Christine O.C. Miller in the Statesman case.

The judge also has made it easier for plaintiffs in 40 other cases to conduct discovery, which is the fact-gathering process before trial.

He is allowing them to conduct joint depositions of 17 witnesses, most of whom are former government regulators who helped arrange regulatory goodwill deals.

Lawyers for the thrifts also are beginning to take the steps necessary to collect any awards. Edward Sisson, a partner at Washington law firm Arnold & Porter, reminded the Treasury Department in a Feb. 18 letter that the government could be on the hook for $20 billion in damages.

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