WILMINGTON, Delaware (Reuters) - Washington Mutual Inc’s officers, directors, underwriters and auditor have agreed to a $208.5 million settlement to end class-action securities fraud lawsuits, according to court documents.
The settlement is among the largest stemming from the financial crisis, trailing a $624 million settlement by Countrywide Financial Corp and $475 million by Merrill Lynch & Co Inc.
The lawsuits in the U.S. District Court for the Western District of Washington accused the defendants of concealing from investors poor loan underwriting and inflated appraisals that juiced earnings. That inflated the company’s stock price, which was once a stock-market darling.
As the U.S. housing market began to crash, Washington Mutual’s loans soured at an alarming rate. In September 2008 regulators seized the company’s savings and loan business in the largest bank failure in U.S. history.
The day after the seizure, the bank holding company, Washington Mutual Inc, filed for bankruptcy.
Under the terms of the class-action settlement, announced in court papers dated Thursday, claims against the directors and officers will be settled for around $105 million.
About a dozen underwriters of the company’s securities contributed $85 million to the settlement; the company’s auditor, Deloitte & Touche LLP, contributed $18.5 million.
The settlement is subject to court approval.
The cases were consolidated as Washington Mutual Inc Securities, Derivative & ERISA litigation, U.S. District Court, Western District of Washington, No. 08-md-1919.
Countrywide and Merrill Lynch were both acquired by Bank of America in 2008.
Reporting by Tom Hals; editing by John Wallace