Dan Primack

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Married to the mess: FDIC sues the WaMu wives

March 17, 2011: 3:29 PM ET

The FDIC today threw some long-awaited meat to the dogs who continue to bark over the September 2008 collapse of Washington Mutual, by suing three of its senior executives for gross negligence and breach of fiduciary duty. The complaint seeks $900 million in relief, and claims that the trio "focused on short term gains to increase their own compensation, with reckless disregard for
WaMu's longer term safety and soundness."

The former WaMu executives are: CEO Kerry Killinger, president and COO Stephen Rotella and home loans boss David Schneider.

Again, something like this had been expected. But the FDIC kept it interesting by expanding the defendant rolls to include the wives of both Killinger and Rotella.

In both cases, the charges involve improper transfer of property. For example, the complaint alleges that Kerry and Linda Killinger transfered their stakes in a Palm Desert residence two a pair of residential trusts, in order to hide the assets from present and future creditors. It accuses the Rotellas of a similar scheme in Long Island, and also suggests that Stephen Rotella tranferred $1 million to his wife after WaMu collapsed.

The FDIC is asking the court to freeze the relevant assets. From the suit:

Given the Killingers' and the Rotellas' prior efforts to fraudulently convey their assets to avoid the reach of creditors, and the fact that their assets are substantially insufficient to satisfy the damages claimed in this Complaint, a possibility exists that the FDIC would suffer imminent harm if the requested injunctive relief is denied.

Both Kerry Killinger and Stephen Rotella already have released statements blasting the FDIC's action. No mention of their wives, however. Well, at least not yet...

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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