Bankruptcy Judge Mary Walrath ruled recently that the Washington Mutual Inc. bankruptcy will not be subjected to an investigation by an independently appointed examiner. Shareholders had requested that the bankruptcy court allow an independent examiner to investigate Washington Mutual to determine the value of outstanding legal claims against the bank. But bankruptcy judge Mary Walrath said that Washington Mutual had already been the subject of numerous investigations, including congressional hearings and the bankruptcy case did not need another investigation by an independent examiner.
“The equity committee is able to fully conduct the investigation that the examiner is able to conduct,” she said.
But shareholders are vehemently against Washington Mutual’s bankruptcy reorganization plan which would distribute $7 billion to creditors and leave the shareholders with nothing. The shareholders insist that Washington Mutual has assets and outstanding legal claims worth up to $20 billion and they should get their share of those assets. They are also against the bankruptcy plan because it will release JP Morgan and the FDIC from legal claims relating to the bankruptcy case.
Washington Mutual, which is the biggest bank failure in U.S. history, was seized by the FDIC in September 2008 after the collapse of the housing industry. The bank was then sold to JP Morgan for $1.9 billion and it filed for bankruptcy the next day. Washington Mutual’s bankruptcy has been mired in controversy and conflict as creditors and shareholders fight over the bank’s remaining assets. Shareholders, who are at risk of walking away with nothing, have tried everything to get the company’s assets evaluated by an independent examiner but so far their efforts have failed.