Glendale Federal Has Strong Case, Judge Says

A federal judge says Glendale Federal Bank has a strong case in a $2-billion lawsuit alleging that the government reneged on accounting rules set up to help the savings and loan industry through the crisis that nearly led to its collapse in the 1980s.

The judge’s remarks, in a transcript of a July 29 hearing unsealed Thursday, bolstered similar cases by other thrifts with claims totaling up to $15 billion.

Judge Loren Smith said the thrift has an exceedingly strong and convincing case in its claims against the government for allegedly changing accounting rules that had been offered as “goodwill” incentives in the 1980s for thrifts to buy other troubled thrifts.

Smith, who is overseeing the case in the U.S. Court of Federal Claims in Washington, made the remarks midway through the case, shortly after Glendale Federal’s presentation ended July 18.

Glendale Federal, a unit of Glendale-based Golden State Bancorp, began presenting its case in February.

The federal government began presenting its case this week.

The trial is expected to conclude next year.

“If the decision were to be made today by me, which obviously it won’t be because I have only heard half of the case, I would grant the plaintiffs’ recovery that they’re seeking, essentially the same amounts they’re seeking,” Smith said in the transcript.

Golden State’s stock rose $1 to close at $30.13 on the New York Stock Exchange.