Most Litigation Settled over Failure of Penn Square Bank

By Carter, Kim | THE JOURNAL RECORD, July 3, 1987 | Go to article overview

Most Litigation Settled over Failure of Penn Square Bank


Carter, Kim, THE JOURNAL RECORD


Mostlitigation arising out of the failure of Penn Square Bank has been resolved or settled in the last five years since the July 5th closing, but appeals of last fall's trial and one criminal indictment remain to be thrashed out in court.

In addition, a civil trial has been tentatively set for October in a federal case filed by a Minnesota thrift against Penn Square Bank - or the Federal Deposit Insurance Corp. as receiver - and the bank's directors and officers.

First Federal Savings & Loan of Hibbing, Minn., alleges a scheme to defraud was devised and violations of the federal racketeering act were committed by the bank, its directors and officers. Other defendants are Professional Assets Management Inc. of Del Mar, Calif., Peat, Marwick, Mitchell & Co. and its Oklahoma City partners and C.T. Conover, former U.S. Comptroller of the Currency.

William G. Patterson, former executive vice president and board member of Penn Square Bank, will stand trial in federal court in Chicago on Sept. 14 in connection with 12 counts of wire fraud and bank fraud.

Jere Sturgis, Enid oilman, and John Lytle, former president of Continental Illinois National Bank of Chicago, have also been indicted in Chicago and accused of being involved in a $1 billion loan scheme to defraud Continential Illinois.

Patterson was found innocent of a 25-count federal indictment in Oklahoma City on Sept. 26, 1984.

In a trial consolidating six civil lawsuits involving Penn Square bank loans, the FDIC was ordered to pay $1.9 million to two credit unions which invested a total of $4.5 million in Penn Square Bank prior to its failure.

The ruling involved a constructive trust which is an equitable remedy to restore 100 percent of the dollars invested in a bank, if the deposits were induced by fraudulent means. The credit unions won liability judgments against the FDIC for fraud in late September. …

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Most Litigation Settled over Failure of Penn Square Bank
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