$51 million, Jones, Day, Reavis & Pogue of Cleveland to settle a lawsuit by the Government in the savings and loan scandal

Submitted by Quest-News-Serv... on Thu, 09/24/2009 - 04:02.

for you norm !

Despite Big Settlement, Firm Feels Little Pinch
By JOHN H. CUSHMAN Jr.,
Published: Friday, April 23, 1993
What happens to a law firm when it has to pay more than $50 million -- an eighth of its estimated annual revenue -- to settle a lawsuit by the Government in the savings and loan scandal?

In the case of Jones, Day, Reavis & Pogue of Cleveland, apparently not very much.

Jones, Day's $51 million payment to the Resolution Trust Corporation -- the Federal agency that takes over failing thrift institutions and sells their assets -- is the largest amount paid so far by a law firm to settle professional liability suits stemming from the savings and loan debacle.

But Patrick F. McCartan, the firm's managing partner, said today that because the settlement is mostly covered by insurance and would be paid out in installments, the actual cost to the firm would be "rather insignificant" -- less than 1 percent of revenue, or a few thousand dollars a year per partner. Link to Lincoln Savings

It was the failure of the Lincoln Savings and Loan Association when it was owned by Charles H. Keating Jr. that brought on the lawsuit against Jones, Day. Mr. Keating, who is already serving a prison sentence after being convicted in Arizona on state charges, was convicted in January on Federal charges of fraud, conspiracy and racketeering and is to be sentenced next month.

It cost the Federal Government $2.5 billion to take over Lincoln. In its lawsuit the Government was seeking from $200 million to $500 million from Jones, Day, asserting that the firm's work for Lincoln Savings was partly to blame for its collapse.

That is an assertion that the firm disputes, but one that Mr. McCartan decided -- reluctantly, he said -- not to contest in a trial.

"The decision had nothing to do with the merits of the case," he said in a telephone interview from the Cleveland offices of Jones, Day, which has 1,100 lawyers and is one of the two or three biggest firms in the country. "This was a business judgment. It was really one based on my determination to put the entire matter behind us."

He said the firm had budgeted more than the amount of the settlement to contest the case, but had to contemplate the possibility that a jury verdict would prove even costlier. Another important factor was the firm's belief that it might be sued again for actions involving other savings and loans institutions; under the terms of the settlement, that threat has been eliminated.

Jones, Day will not discuss its finances in detail. But the annual report on big law firms by The American Lawyer, a legal journal, estimated that the firm's revenues in 1991 were $406 million and that the profits per partner were $315,000.

Mr. McCartan said the firm's involvement in the Keating case had not hampered its ability to attract and retain clients and lawyers.

But he said he was upset because one of the firm's lawyers, William J. Schilling, was unable to fight the Government in court. The Federal Office of Thrift Supervision, which regulates savings and loans, refused to settle with Jones, Day unless Mr. Schilling also accepted a consent order. Some Previous Penalties

Mr. Schilling had been a Federal bank examiner before joining the firm and working on the Lincoln case. Now he has agreed not to work on banking matters.

"Bill decided that he would not hold the firm hostage to his individual situation," Mr. McCartan said. "We are going to stand by him, and help him develop a new discipline."

Though the Jones, Day settlement is the largest by a law firm in the savings and loan scandal, it is hardly the only one. Big accounting firms have reached settlements in the hundreds of millions of dollars.

Jones, Day itself settled for $24 million last year with plaintiffs in the investment-fraud complaint. Kaye, Scholer, Fierman, Hays & Handler, aLos Angeles law firm that also represented Lincoln, also settled with the Government for $41 million and with the private investors for $20 million last year

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http://www.nytimes.com/1993/04/23/news/despite-big-settlement-firm-feels-little-pinch.html

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Thanks Guy

You may know Jones Day caused REALNEO, you, me and my family significant harm.

I couldn't live with myself.

Disrupt IT

Unfortunately Norm, most of

Unfortunately Norm, most of these people go to sleep and don't give a second thought to how they destroy people's lives.

 

After downing a bunch of Scotch

And a bunch of pills

Disrupt IT

There's a lot of that going

There's a lot of that going around everywhere that's the only way they can get any rest  and then when they wake up they need some to be able to look in the mirror or get through the day. 

I still say that we need drug testing in these non-profit organizations and it wouldn't hurt to start right here in this community.  Think they should also be required to take a BAT test as well before entering to conduct business. 

This is related to the first

This is related to the first crisis, the S&L crisis.

It’s really complex…

The S&L was Lincoln and then they failed….the resolution trust liquidates in that event.

It seems that Lincoln must have had council with JDRP and that council must have left them liable.

They are downplaying it, it is significant and there may be more similar type instances related to the more recent debacles. Considering this is what a 16 year old settlement, then we could be reading about rulings or settlement related to the more recent events in 2020 or even later and for even larger amounts.

Who hold the insurance?

The saving and loans lent more than they had, lent too much to do what? Build redundant strip mall in the suburbs, build redundant office buildings…lend to people opening businesses in saturated markets. They offered bad loans that failed. They also did not have real assets to cover them, like a house of cards.

It is not that different than what happened this time just not as large in scope and size. That time it was much more about offering saving at higher rates and then leveraging those with loans at higher rates. The cash flow became negative and collapsed the banks. The government comes in and pay the bills, but they also look back to see or seek procuring causes.

In this instant is was the legal council and they of course fought it off, that’s what they do, they fought it for 16 years and settled at $51 million. The loss on that S&L was said to be $2.5 billion and covered by tax  FDIC dollars. Then originally the amount being pursued as damages was $200 million to $500 million? The attorneys are not that liable are they?

It’s more about the law saying you have to have them than that they actually add any value, because they obviously do not. Its the actual bank management that is and should go to jail and the chairman of that bank did serve five years.

 

http://en.wikipedia.org/wiki/Keating_Five