The federal government dropped its court case against the auditors of now-defunct Park Bank of St. Petersburg, and the matter will be resolved in binding arbitration. The lawsuit was dismissed on Jan. 6, the day before the trial between the Federal Deposit Insurance Corp. (FDIC) and Cherry, Bekaert & Holland, a St. Petersburg accounting firm, was to begin in U.S. District Court in Tampa.
"It was definitely a courthouse steps resolution," said Elizabeth Sarah Gere, a Washington lawyer representing Cherry, Bekaert.
"If they could've slam dunked, they would have," said Wilburn Robinson, partner in charge of Cherry, Bekaert's practice in Pinellas County. "The lawyers say it's better to settle. I'd like to see our good name cleared."
Marilyn Anderson, a lawyer for the FDIC in Washington, said only: "We decided arbitration was the best course of action."
The joint motion for dismissal states a resolution from an independent mediator is expected "as near as possible to Feb. 1."
The FDIC sued Cherry, Bekaert in July 1988, alleging the auditors ignored signs that Park Bank was on the financial rocks. The auditors had offered "clean" opinions on the bank's financial statements.
Among the allegations in the lawsuit is that Cherry, Bekaert approved of Park Bank's reserve fund for bad loans of $3.2-million, which was established in 1983.
The suit contended "the minimum reserve should have been $15.5-million," and that a substantially bigger fund would have put the bank in a very different state of health. Park Bank failed in 1986.
Anderson, the FDIC lawyer, said she expects the government to receive a cash settlement.