A settlement of $36 million was reached last week in a case that sought to determine whether the former top dogs at the defunct Richmond financial firm should be blamed and held financially responsible for the company’s 2008 demise.
The suit, which was filed about a year ago against almost two dozen former executives and directors that included some big Richmond names, was settled with the help of insurance coverage LandAmerica had to protect them against such instances.
Under the terms of the settlement, insurance companies that issued coverage for the officers and directors will pay $36 million to Bruce Matson, the trustee trying to recoup funds in the bankruptcy of LandAmerica Financial Group.
The resolution allows the 20 former executives and directors to step away clean-handed and gives the trustee a chunk of change to help further pay off those left hanging by the company’s collapse.
“The officers are very pleased that it has been resolved in a constructive fashion,” said Scott Fredericksen, an attorney with Foley & Lardner in Washington who represented several of the former LandAmerica executives in the case. “They appreciate that all parties have reached an amicable resolution.”
Saul Pilchen, an attorney with Skadden, Arps, Slate, Meagher & Flom in Washington who represented 12 former directors of LandAmerica, relayed a similar sentiment from his clients.
“We are very gratified that we were able to reach a settlement with the trustee,” Pilchen said. “My clients fought the case vigorously and acknowledged no wrongdoing. They are glad the case is behind them.”
Jeff Sabin, the lead attorney representing Matson in the case, did not reply to a request for comment.
Matson also did not respond to a request for comment.
Legal experts in Richmond have said all along the case was filed largely with the intention of triggering those insurance policies. Even though the company hasn’t existed for almost three years, those policies were still valid.
Among the former heads that had been sued in the case were former LandAmerica chief executive Ted Chandler, former LandAmerica chief legal officer Michelle Gluck, who is now general counsel at the Federal Reserve Bank of Richmond, former Virginia Commonwealth University president Eugene Trani and longtime banker Robert Norfleet Jr., both of whom were directors at the company.
The case was filed in June 2010 and alleged that 21 officers and directors of LandAmerica Financial Group and its subsidiary LandAmerica 1031 Exchange Services breached their fiduciary duty and caused the companies to suffer massive financial losses and ultimately go bust. https://richmondbizsense.com/2011/07/08/former-landamerica-bosses-slapped-with-365m-suit/
The crux of the case raised the question of whether the bosses at LandAmerica were so incompetent during its demise in 2008 that they should pay damages to creditors, or whether they simply made the best decisions they could in a tumultuous time.
Attorneys for the LandAmerica bosses argued that the case should be thrown out because it didn’t hold up to current law and was trying to punish the defendants for making bad — but not illegal or negligent — business decisions.
The trustee argued that the executives and directors failed to take timely and informed action in response to the risks the company faced after the collapse of the auction rate securities market in February 2008, which sent the company into a downward spiral.
The case had been set to head to trial in November, prior to the settlement being reached.
Judge Kevin Huennekens is presiding over the case in federal bankruptcy court.
The settlement also put an additional $3 million back in the trustee’s pool of money after the executives and directors agreed to drop claims they had made against the company for money owed. The trustee had a reserve of $3 million set aside for those expected legal costs.