WASHINGTON — The Federal Deposit Insurance Corp. will now include out-of-court settlements in its regular reporting of civil actions against failed-bank officers and directors.
The online posting of the deals reverses a prior policy of releasing out-of-court agreements only on requests from interested parties. The change appeared to respond to claims that the agency was trying to keep such settlements — in which former bank managers agree to monetary fines without having to endure a court battle — under wraps.
"While these settlements were available to the public upon request, the FDIC will now also make them available on its website," the agency's chief spokesman, Andrew Gray, said in a statement.
The agency plans to have over 300 such agreements — related to banks that have failed since January 2007 — for public view in the near term, and will establish a practice to post future settlements as well. The agency said it has also ceased including special clauses in the agreements pledging not to "initiate" disclosure.
"Going forward, any new professional liability settlements will be posted on a regular basis and integrated with the existing monthly reporting of authorized professional civil actions," Gray said.
Under its authority to stand in as the receiver for failed institutions, the FDIC is authorized to bring civil suits against former directors and officers — alleging negligence in their running of banks before they were closed — in order to recoup money for the Deposit Insurance Fund. So far, over 50 suits have been filed. Yet many cases never make it to actual litigation, with potential defendants simply agreeing to pay damages. Many lawsuits ultimately also get settled out of court. (To date, the FDIC has raised over $780 million from its failed-bank civil actions.)
The agency's new posting practice follows the publication of a March 11 article in the Los Angeles Times, which reported the existence of scores of unreleased settlements. The article, which had obtained the agreements from the FDIC through a Freedom of Information Act request, also highlighted special clauses in some of the deals containing pledges not to issue press releases in connection with an agreement.
Among the 300 agreements, about 4% of them had such clauses, based on an FDIC review of the documents.
"With respect to the use of so called 'will not initiate press release clauses' in settlements, the review indicates that they have been used very rarely," Gray said. "However, the FDIC agrees that there should be no constraint on the release of public information and as a matter of policy will no longer agree to such clauses in future settlements."
Previously, the FDIC website only listed docket numbers for filed litigation against former directors and officers, but starting Friday began to post links to actual agreements that were inked out of court. Agreements finalized from January 2007 through September 2012 were posted by the close of business on Monday.