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To: Amy Feller who wrote (33)	7/18/1998 2:25:00 AM
From: Amy Feller	Respond to of 43

Cal Fed Wins!: Washington, July 17 (Bloomberg) -- A federal judge ruled the U.S. broke a contract with California Federal Bank, opening the way for more trials on savings and loan claims for as much as $30 billion in damages against the government. U.S. Claims Court Chief Judge Loren Smith accepted Cal Fed's argument that the government acted improperly by breaking an agreement to let the San Francisco-based thrift count part of the premiums from three acquisitions, called ''supervisory goodwill,'' as capital. Smith referred the case to another judge for a trial to determine the amount of damages. Separately, the government agreed to pay $41.5 million to Dollar Bank, a Cleveland-based mutual bank, to settle similar claims. The settlement is the fourth in more than 100 supervisory goodwill cases filed against the government. The $41.5 million is much less than the $266 million in regulatory capital that Dollar said it lost when Congress passed a 1989 law ordering a quick phase-out of supervisory goodwill. Still, Dollar said the settlement fairly compensated the bank. Dollar didn't face the same problems that other financial institutions did when they fell below regulatory capital requirements, said Dollar's outside lawyer Cantwell F. Muckenfuss. ''This case should not be seen as a benchmark,'' Muckenfuss said. ''While Dollar's damages were real, they did not approach the impact that other institutions suffered.'' Cal Fed Ruling The Cal Fed ruling marks the fifth case in which, outside the context of a settlement, the government has been found at fault for breaking an agreement on goodwill. Courts ruled against the government in three first-round goodwill cases, including that of Golden State Bancorp, the first thrift to go to trial. Glendale, California-based Golden State is waiting for Smith to decide on damages. Cal Fed is the first in a second group of a dozen thrifts to win a judgment of liability. In addition, the government is not contesting liability in a fifth case. Cal Fed's outside attorney, Steven Rosenthal, declined to say how much Cal Fed is requesting in damages. The thrift was forced to write off $485 million in goodwill after the government changed accounting rules. Thrifts have typically claimed damages as much as three times the underlying goodwill, based on profits lost due to the government's actions. Lawyers had expected Smith to grant judgment for Cal Fed. In December, he sided with Cal Fed and other thrifts on a series of key issues that have arisen in multiple cases. ''I'm not saying we agree, but it's not a surprise,'' said David Cohen, the Justice Department attorney supervising goodwill cases. In the 1980s, dozens of thrifts bought insolvent institutions based on the commitment of U.S. regulators that part of the price-premium, known as supervisory goodwill, could be counted as capital. In other cases, the government provided cash that could be counted as capital, called capital credits. After Congress abolished supervisory goodwill in 1989, about 120 groups of investors sued, charging breach of contract. Since that time, investors have won a series of court fights, including a ruling by the U.S. Supreme Court, forcing the government to begin making concessions in the cases.