Penn Square Bank Failure Effects Will Be Long Felt / Today Marks 4th Anniversary

Article excerpt

Today is the fourth anniversary of the failure of Penn Square Bank in Oklahoma City.

One wonders if those involved with the bank in its heyday would ever have imagined how much money, how many attorneys, and most of all, how much time it would take to unravel the tangled jumble of issues which emerged when the bank's doors were closed on July 5, 1982.

Nine major cases stemming from the failed bank, seeking a total $740.6 million in damages, have been consolidated for trial Aug. 18 in federal district court in Oklahoma City. The resolution of those issues could be a significant milestone in putting this subject to rest.

Jurors will be asked to examine whether the former management of Penn Square Bank, along with Peat, Marwick, Mitchell & Co., the bank's audit firm, and the Federal Deposit Insurance Corp., committed fraud and negligence upon depositors.

But there are a host of related matters set in motion by Penn Square Bank that are likely to continue for some time to come, insuring that Oklahoma's biggest bank failure will be a topic of conversation for quite awhile.

- For example, Oklahoma legislators became riled when they suspected the Federal Deposit Insurance Corp. was wasting money on the failed bank's liquidation.

Complaints by U.S. Sen. David Boren, D-Seminole, and U.S. Rep. Mickey Edwards, R-Oklahoma City, resulted in the U.S. General Accounting Office conducting a supplemental audit of Penn Square expenditures in connection with a nationwide overview of FDIC liquidation operations.

Results of the audit should be available later this month, predicted Barbara Webb, press secretary to Boren.

The Oklahoma legislators have charged that the FDIC used a double standard in handling the Penn Square Bank failure compared to other failures.

Boren and Edwards introduced bills to require periodic bank liquidation reports to Congress by the FDIC, which is pending in House and Senate Banking Committees.

- Criminal investigations by the U.S. Attorney's office in Oklahoma City in connection with the failed bank continue.

Three former bank officers have faced federal grand jury indictments. Two - former Executive Vice President Thomas Orr and former Assistant Vice President Clark Long - were convicted and are doingtime.

The third, former Senior Executive Vice President William G. Patterson, was acquitted of one 25-count indictment in an Oklahoma City federal court, but faces another 16-count indictment by a Chicago grand jury. That trial has been postponed twice, for what looks like an indefinite period.

Also indicted by the Chicago grand jury were Enid oilman and former Penn Square Bank borrower Jere Strugis, and John Lytle, former vice president at Continental Illinois National Bank & Trust Co. in Chicago.

- Liquidation of the bank's remains, plus litigation of claims, continues.

The FDIC has paid three dividends to uninsured depositors and proven creditors of Penn Square Bank, for a total of $251.6 million, or 55 percent of the amount of their claims. Yet to be paid are $205.9 million in proven claims.

The agency has predicted that proven creditors will recover 65 percent of their losses.

The last dividend was 20 percent, and was paid in December.

The receivership estate has issued $457.5 million in receivership certificates, while more than $700 million in claims have been rejected.

Pending claims litigation has been reduced to about $40 million.

About $217 million in assets remain to be liquidated.

- A long-awaited answer to the status of standby letters of credit in a failed bank situation was answered when the U. …