A Washington judge may decide as early as this week whether two former Washington Mutual executives who were accused of taking gambles that led to the biggest bank failure in U.S. history are entitled to $23.1 million in “golden parachute” payments.

Former Chief Operating Officer Stephen Rotella and David Schneider, former president of the home-loans unit, were two of the three WaMu executives that the Federal Deposit Insurance Corp. sued for gross negligence and breach of fiduciary duty after the lender collapsed in 2008 amid the home-mortgage debacle.

The three, including former WaMu CEO Kerry Killinger, settled the FDIC’s suit for $64 million in 2011. According to The Wall Street Journal, Rotella and Schneider are now arguing their golden parachute payments should have been triggered by the seizure and subsequent sale of WaMu’s banking assets to JPMorgan Chase in 2008.

Because of the seizure, they say, WaMu ceased to be covered by federal rules that bar golden parachute payments when banks fail unless they receive an exemption from the FDIC.

WaMu’s liquidating trust counters that golden parachutes were never intended to grant windfall payments to people who contributed to the downfall of a financial institution. Rotella and Schneider claim they are owed $15.7 million and $7.4 million, respectively.

“The row is another in a long line of disputes involving executives who worked at firms that failed or were bailed out during the financial crisis,” the WSJ said, citing challenges to the pay packages of financiers at Lehman Brothers and AIG.

If the WaMu trust is unsuccessful in obtaining a ruling against the payments, Rotella and Schneider would have to turn over all but $4.3 million and $1.6 million, respectively, of their golden parachutes to the FDIC.

But somewhat confusingly, the FDIC has argued that WaMu’s trust is restricted from making the payments, saying in a letter last month that Rotella and Schneider “promoted [WaMu’s] culture of reckless lending, and bore substantial responsibility for the bank’s demise.”

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3 responses to “Ex-WaMu Execs Seeking $23M in Golden Parachutes”

  1. The executives of Washington Mutual Bank (called “The Bank from Hell” on the internet in the 1990’s for their fraudulent practices) should be serving jail sentences . It is outrageous that these crooks, who did not bother to set up an ordinary, working bookkeeping system to take care of customer’s accounts properly, should be rewarded for their total mismanagement of a financial institution.

    The number of depositors at Washington Mutual who had recourse to anyone at that shoddy, impersonal, uncaring. pitiful answer for a fiduciary financial entity, no doubt , numbers to no more than 10 individuals. and that number is high.
    Washington Mutual’s only goal was to buy as many other banks as it could in the shortest number of time that it could. To service the thousands of new accounts that it acquired was a minor consideration.
    Because of the callousness and the greed of the executives at the “Bank from Hell” thousands upon thousands of hard working “little ” people who paid their loans on time and followed all of the rules were threatened with foreclosure or were foreclosed upon, thru no fault of the loan holder. This crummy bank did its damage. If anyone dared to complain, that loan holder was certain to be taken to court. Of course , Washington Mutual had unlimited resources. A court case would obliterate a loan holder. Now should these unscrupulous money men who are asking for millions of dollars for their inept, ruinous mismanagement of a multi million dollar enterprise be paid millions of dollars? The answer is a resounding NO! These men should go to jail! Violet Lorenzen
    The answer: a resounding NO. They should all go to jail. Violet Lorenzen
    Are they to be rewarded for their

  2. Yes, they should be jailed. Not only did people lose their homes, all employees of Wamu lost their jobs as well.

  3. Not only that, but they misrepresented their financial results to shareholders, who had their investments in WaMu essentially wiped out, when it was seized by Shiela Bair and sold into conservancy. Where is the fairness in misled investors having their personal earnings that they placed into the stock based on trusting in the misleading public financial data wiped out, while those who misrepresented results get golden parachutes?!

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