The wait finally may have ended. The Federal Deposit Insurance Corporation unveiled a lawsuit this week against the former CEO of Washington Mutual and his two top deputies, saying the trio made huge personal fortunes at the expense of the company, which declared bankruptcy in 2008. The three men could face $900 million in fines. “They focused on short-term gains to increase their own compensation, with reckless disregard for WaMu’s long-term safety and soundness,” the complaint states.
[Resource: Get Your free Credit Report Card]
Kerry K. Killinger was the longtime CEO of the Seattle-based company, which was the nation’s largest savings bank at the time of its collapse. The lawsuit also names David C. Schneider, WaMu’s president of home lending, and Stephen J. Rotella, the bank’s chief operating officer. Together, their “gross negligence and breaches of fiduciary duty” caused “Wamu to lose billions of dollars,” according to the complaint.
The lawsuit comes as federal regulators face criticism for failing to hold banking leaders accountable for the Great Recession of 2007. That criticism reached new volumes at this year’s Oscar’s ceremony, watched by 37.6 million people.
“I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong,” Charles Ferguson, whose film “Inside Job” exposed conflicts of interest between federal regulators and top bank officials that led to the collapse, said as he accepted the award for best documentary.
Even after the housing bubble burst, Washington Mutual continued to push its brokers to sell more mortgages, including subprime loans with high interest rates and high rates of failure, the complaint found. In strongly worded statements to The New York Times, the defendants dismissed the allegations, which Killinger referred to as “political theater.”
“Those initiatives—once applauded by the regulators as diligent and responsible management—have, through the alchemy of Washington, D.C., politics been turned into allegations of gross negligence,” Killinger said in the statement.
Image: Crunchy Footsteps, via Flickr.com