Law Firm To Pay State $27 Million To Settle S&L Suit
May. 12, 1987
ANNAPOLIS, Md. (AP) _ A Baltimore law firm agreed Tuesday to pay Maryland $27 million to settle a suit brought by the state alleging that the firm contributed to the 1985 savings and loan crisis.
The state had alleged the firm Venable, Baetjer & Howard played a role in the near-collapse of the industry by failing to provide competent legal representation to Maryland Savings-Share Insurance Corp.
The legal malpractice suit alleged the firm acted improperly by representing simultaneously the MSSIC, which formerly was the private insurer for 102 Maryland thrifts, and the thrifts that were insured and regulated by the corporation.
MSSIC was insuring the thrifts when the crisis began in May, 1985, with a run by depositors at Old Court Savings and Loan.
When the run spread to other thrifts the state stepped in to forestall the collapse of the industry. The legislature abolished MSSIC and insured the thrifts through a new agency until they could move under the federal deposit insurance system.
The state is dissolving two of the thrifts, Old Court and First Maryland. Depositors at those two institutions still are owed about $500 million, which the state is committed to repay by the end of 1989.
The suit filed by the state last year asked for $450 million from Venable, Baetjer and Howard.
Gov. William Donald Schaefer, who had asked the attorney general to try to negotiate a settlement to avoid a long, costly court suit, said the state had achieved ''a very fair, equitable and substantial settlement.''
The law firm is one of Maryland's largest and most prestigious. Alan Yarbro, a spokesman, said Venable, Baetjer and Howard denies all of the allegations in the state suit and agreed to a settlement to avoid a protracted legal battle.
''We think that this is a positive step and will allow us to go forward,'' he said.
The $27 million will go into the fund the state is using to pay off depositors, but there may not be any quick benefit to people whose money has been tied up for two years at Old Court and First Maryland.
Irwin Goldbloom of Latham and Watkins, a Washington law firm hired by the state to help develop the case, said the $27 million was one of the largest legal malpractice settlements in the nation.
Attorney General J. Joseph Curran said Venable, Baetjer and Howard had $30 million in insurance to cover the cost of the settlement.