American Savings settles
lawsuit with PaineWebber
American Savings Bank, which took a $7.8 million write-down, net of tax benefits, for four trust certificate securities it was not permitted to own, has successfully negotiated a settlement with the seller of three of those securities, PaineWebber Inc.
Terms of the settlement, which was signed Wednesday, were not disclosed, but also include settlement of claims by Hawaiian Electric Industries Inc., parent company of American Savings Bank, which purchased the securities from American in 2001. HEI recognized write-downs of $8.5 million, net of tax benefits, related to these securities.
Amounts received in settlement will be recognized in HEI's financial statements in the fourth quarter. The settlement stems from a 2001 lawsuit that American Savings Bank filed in federal court against PaineWebber.
The bank sought legal relief from the brokerage after it was notified by the Office of Thrift Supervision that $84 million in securities, purchased from PaineWebber, were impermissible investments under regulations governing federal savings banks.
The lawsuit did not include the seller of the fourth security, First Union Securities Inc., which is a subsidiary of First Union Bank. The $30 million of First Union Securities were sold in 2001 at an amount that approximated its original purchase price.
The trial, scheduled to begin in early December, had sought rescission of the sale transactions, monetary damages, and other relief.
The brokerages had a fiduciary responsibility not to sell the bank what the bank was not allowed to own, said Robert F. Clarke, chairman, president and chief executive of Hawaiian Electric.