SEATTLE - Washington Mutual Inc. announced Monday that it is seeking to have 18 million of its own shares and about $85 million of cash released from an escrow account formed when it bought American Savings Bank in 1996.
The $262.2 billion-asset Seattle thrift company said that the account, managed by Bank of New York, was scheduled to be dissolved Friday. But the account's beneficiaries, the Federal Deposit Insurance Corp. and the former owners of American Savings, are disputing that termination, a Wamu spokesman said.
The FDIC has requested that Bank of New York not release the shares and said that the account's life can be extended for up to four years, Wamu said in a press release.
According to the company's annual report, 65% of the escrow account should be released to the former investors in American Savings' previous parent, Keystone Holdings, and the rest to the FDIC's Federal Savings & Loan Insurance Corporation Resolution Fund, when Wamu receives proceeds from a 1992 filed by American Savings against the U.S. government.
A Wamu spokesman said that the funds should revert to the company if the shares are released but should have "no material impact" on earnings.
The disagreement over when to release the funds has prompted a change in the structure of Wamu's board. "In order to facilitate discussions among the parties," two directors affiliated with Keystone have resigned, the thrift said.
The directors are David Bonderman, who owns 1.4 million shares held in the escrow account, and J. Taylor Crandall, who owns 2.4 million, according to Wamu's most recent proxy statement.
The dispute stems from a lawsuit in which American Savings, of Irvine, Calif., accused the government of breach of contract in the sale of distressed savings and loan assets to Keystone. When Wamu bought Keystone in 1996, it put 8 million shares in a litigation escrow account for the benefit of American Savings' previous owners and the FDIC, to be released when and if Wamu received proceeds from the lawsuit.
Thanks to two stock splits, those 8 million shares have ballooned to 18 million. The escrow account also holds accumulated interest and dividends.
The U.S. Court of Federal Claims gave its summary judgment to the case in April and concluded that the government had breached the contract. The FDIC claims the summary judgment established the conditions for an extension of the escrow account.
A spokeswoman for the FDIC would not discuss the matter.
As a successor to American Savings, Wamu said it can still take home reimbursement for its part in the long-running suit, if the proceeds exceed $516 million. The company is still waiting for a decision on the monetary settlement to the case.
