WASHINGTON -- The Federal Deposit Insurance Corp. has settled a lawsuit against directors of the failed National Bank of Washington for $500,000.

A federal judge threw out the government's case against nine of the 11 directors in February and took the unusual step of criticizing the FDIC's case. The judge ordered the FDIC to pay the cleared defendants' legal fees.

The remaining two defendants, Luther Hodges, the bank's former chairman, and Robert Washington, a lawyer, will pay the FDIC $500,000, which is reportedly covered by insurance. The terms of the settlement were not made public, and the FDIC had no comment on Wednesday. The Washington Post reported that lawyers involved said the settlement contains no finding of wrongdoing by Mr. Hodges or Mr. Washington.

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