The govt's hole gets deeper
U.S. Court of Federal Claims Enters Summary Judgment on Liability in Other Goodwill Cases; Glendale Federal Bank Says Action Sends Strong Message for Government to Settle
GLENDALE, Calif.--(BUSINESS WIRE)--Dec. 22, 1997--Commenting on a summary judgment against the federal government in unrelated supervisory goodwill cases, announced today by the U.S. Court of Federal Claims in Washington D.C., Glendale Federal Bank said that the Court's action sends a very strong message to the government that the goodwill cases should be settled.
In its opinion today, the Court of Federal Claims stated: ''If the arguments put forth here are the strongest the United States can muster against liability then the government has a moral obligation to seek a fair and equitable settlement from the parties whose contracts were breached. If this cannot be achieved then the court is here to resolve these cases. However, the court is a tool of last resort. Where the government has violated rights it should first attempt to do justice without judicial prompting.'' Stephen J. Trafton, chairman and chief executive officer of Glendale Federal Bank and its holding company Golden State Bancorp Inc. (NYSE:GSB), said, ''While this decision was entered in other goodwill cases, the Court's admonition to the government is clearly equally applicable to Glendale Federal's case. We have consistently pointed out the folly of the government's attempts to evade responsibility for the damages caused to Glendale Federal by the government's breach of contract. We have raised a warning before on damages, and we do so again now. A freight train is coming down the tracks, and today's Court ruling is a bright warning light. At each step of our case, the bank has extended offers to settle, but the government thus far has stubbornly rebuffed serious negotiations, even as the potential cost to taxpayers has continued to grow.'' In the liability phase of Glendale Federal's litigation against the government, the U.S. Court of Federal Claims ruled strongly in favor of the bank, a decision that was sustained by the U.S. Court of Appeals for the Federal Circuit and the United States Supreme Court. The damages phase of the litigation began in February 1997. After Glendale presented its case and before the government began its case, the Court, in a July hearing, said that Glendale had presented a very convincing case and, were the decision to be made at that time, the Court would award the bank its full damages claim. Glendale has set forth arguments for damages approaching $2 billion.
On November 20, 1997, Glendale Federal Bank announced a proposal to settle its breach of contract lawsuit against the federal government for $1.5 billion, as part of the bank's creation of a community lending program designed to contribute to the economic improvement of low- and moderate-income and minority communities in California. The bank committed to add an equal amount to its existing community investment financing activities if the government were to agree to a settlement by January 30, 1998.
Trafton added, ''As we noted last month, this offer is contingent upon acceptance by the government, which should see in its latest setback an opportune time to undertake serious settlement negotiations with Glendale Federal Bank. As the federal budget for the upcoming fiscal year is prepared in the first quarter of 1998, Congress and the Administration would be well advised to make appropriate provision for resolving the estimated $20 billion of exposure to the claims of the goodwill plaintiffs. By taking the initiative to settle these claims, there is some hope that the government's ultimate exposure can be limited to that amount rather than risking a much greater exposure in continued litigation.'' |
