Obama for America

The Pritzkers and Superior Bank (Updated)

Obama Campaign Statement
"Penny Pritzker was never accused of any wrongdoing nor did she receive compensation in relation to the closing of Superior Bank in 2001, and instead of walking away as millions of homeowners and stockholders suffered, the Pritzker family entered into a voluntary settlement and agreed to pay the government $460 million to defray its losses. Former FDIC Chairman William Isaac said he had 'never known any investor in a failed bank to take responsibility as the Pritzkers have done.' Senator Obama believes that the current housing crisis was caused by lax regulation and a system that put the interests of corporations before the interests of homeowners and investors and he has proposed an aggressive plan to step up the regulation of our financial markets to restore fairness and balance to our economy and to prevent a housing crisis of this scale from occurring again."

Penny Pritzker Statement
"I regret that Superior Bank failed in 2001. I was chair of the bank from '91-94 and over those years, the bank achieved high ratings from the Office of Thrift Supervision. Superior's failure was complex. In short, the bank failed in 2001 because regulators concluded that the valuation of certain assets in Superior's financial statements, which had been audited by Ernst & Young for many years and previously approved by regulators, was overstated and as a result the bank was not capitalized sufficiently. My family voluntarily agreed to pay the FDIC $460M to help defray costs incurred by the government and other losses in connection with the bank's closure. We did this without litigation or any allegation by federal regulators of wrongdoing. I am proud of how my family responded to this situation."

CHICAGO SUN-TIMES GETS THE FACTS WRONG

The Pritzker Family Helped Buy Lyons Savings Bank, not Clyde; The Government Was Looking For Buyers To Alleviate the Savings and Loan Crisis. The Chicago Sun-Times wrote, "The Pritzker family bought the former Clyde Savings and Loan with partner Alan Dworman in 1988." As the Chicago Tribune reported in 1989, "Lyons Savings Bank, which got a new owner at year's end, has a new name. It will be called Superior Bank FSB, said President Sandra Johnigan. The Hinsdale based thrift was purchased by Coast-to-Coast Financial Services, owned by the Pritzker family." In addition, the Pritzker family was stepping in to buy a Bank that the Federal Savings and Loan Insurance Corp. were desperate to sell; "FSLIC officials have defended the December 1988 deals, saying since the agency did not have the money to liquidate failed institutions and pay off depositors, providing incentives was the only way to sell the ailing S&Ls." The Journal of Accountancy noted, "Before the enactment of FIRREA, the FSLIC was the federal insurer of deposits of most savings and loan associations. It also served as receiver for failed S&Ls. As failures increased in the 1980s, it became necessary for the FSLIC to find ways to resolve them other than liquidating the institutions and paying off depositors. The FSLIC began to look for acquirers, including supposedly healthier institutions, but found it had to assist the acquirers because the institutions being acquired had assets of uncertain quality or negative net worth...At the end of 1988, the FSLIC rushed to complete pending transactions by year end, when important tax benefits to acquirers would expire and FSLIC costs would increase. From Thanksgiving through December, the FSLIC closed acquisitions of 35 thrift institutions at a cost itthen estimated to be $27.6 billion. In January 1989, House Banking Committee members, disturbed by the cost of the FSLIC's year end deals, considered introducing a resolution that FSLIC assistance obligations were not backed by the full faith and credit." [Chicago Sun-Times, 4/28/08; Chicago Tribune, 4/27/98; Crains Chicago Business, 10/1/1990; Journal of Accountancy, 2/1/1991]

THE PRITZKERS DID MORE THAN ANY OTHER BANK OWNER IN HISTORY TO SETTLE THE CASE, VOLUNTARILY SETTLING AND PAYING HALF A BILLION DOLLARS

Forbes: The Pritzkers Agreed To Pay $460 Million; "No Bank Owner In History Had Ever Offered Anything Close To That To Settle A Case." Forbes reported, "The Pritzkers initially seemed confident, offering in July 2001 to infuse the bank with $210 million. But by December, with details of Superior's losses under increasing scrutiny, the family was forced to open its checkbook, agreeing to shell out $460 million over 15 years. No bank owner in history had ever offered anything close to that to settle a case." [Forbes, 9/30/02]

Former FDIC Chairman: "I've Never Known Any Investor In A Failed Bank To Take Responsibility As The Pritzkers Have Done." Former FDIC Chairman William Isaac wrote in a Letter to the Editor, "I represented the Pritzkers in their discussions with the FDIC after Superior Bank failed. The family decided to stand behind its investment, ultimately agreeing to pay the FDIC $460 million over a 15-year period, without interest. This is roughly equivalent, on a net present value basis, to the amount the family offered to contribute to keep Superior from failing. I served as FDIC chairman during the 1980s banking crisis. I've never known any investor in a failed bank to take responsibility as the Pritzkers have done. " [Forbes, William Isaac Letter to the Editor, 10/14/02]

The FDIC Lawsuit Against Ernst & Young Didn't "Implicate Superior's Owners Or Management" And The Complaint Went "Out Of Its Way To Sing The Pritzkers' Praises." "The FDIC's allegation against Ernst & Young made big headlines over the weekend. It seeks $2 billion in damages and claims the firm hid accounting errors at Superior to avoid a scandal that might have interfered with the $11 billion sale of Ernst & Young's consulting group in June 2000. But the FDIC's complaint doesn't implicate Superior's owners or management. In fact, it goes out of its way to sing the Pritzkers' praises." [Forbes, 11/5/02]

With The Commitment To Pay $460 Million To The FDIC, The Losses Have Far Exceeded Any Dollars They Received Prior To The Bank’s Failure." Kevin Poorman, an attorney for Pritzker Realty said, "Pritzker business interests lost a substantial amount of money in connection with their indirect investment in Superior Bank. Pritzker business interests owned 50% of the holding company of the bank and never fully recouped their investment. With the commitment to pay $460M to the FDIC, the losses have far exceeded any dollars they received prior to the bank's failure." [Kevin Poorman Statement]

Each Of The 1400 Depositors Who Had More Than $100,000 On Deposit In Superior When It Failed "Has Received Substantially All Of Such Depositor’s Monies." "Each of the 1400 depositors who had more than $100,000 on deposit in Superior when it failed has recovered substantially all of such depositor's monies. To date, each has received $100,000, plus 69% of the uninsured amount of their deposits (i.e., amounts in excess of $100,000). These depositors will continue to receive their lawful pro rata share of future recoveries, including recoveries from monies to be paid by Pritzker business interests under their agreement with the FDIC." [Kevin Poorman Statement]

ERNST AND YOUNG DID NOT PERFORM PROPER OVERSIGHT AND ACCOUNTING

December 2005: Ernst & Young Paid FDIC And Pritzkers in Settlement For Faulty Accounting. American Banker reported, "Another recent settlement ended a long-standing case involving the Pritzkers. The failure in 2001 of Superior Bank, which they co-owned, had been blamed in part on faulty accounting. In December, Ernst & Young LLP agreed to a $125 million settlement with the Office of Thrift and Supervision and the Federal Deposit Insurance Corp. The Pritzkers will get $31.25 million." [American Banker, 1/20/05]

Ernst And Young Inadequately Oversaw The Books Of Superior. "Ernst & Young LLP, the auditing firm accused of inadequately overseeing the books of now-failed Superior Bank FSB, also received consulting fees from the bank that totaled at least twice as much as the fees it received for its accounting services, a federal regulator said. 'It was a direct conflict,' said Gaston Gianni, inspector general for the Federal Deposit Insurance Corp., in testimony to the Senate Banking Committee Thursday. At the hearing, the FDIC, the Treasury Department and the General Accounting Office placed the blame for Superior's failure on poor management, lax oversight by regulators and inadequate oversight by Ernst & Young. The only committee member present was its chairman, Sen. Paul Sarbanes (D-Md.), who likened Superior's downfall to another corporate failure attracting close congressional scrutiny." [Chicago Tribune, 2/8/02]

Forbes: "Improper Accounting That Had Overstated the Thrift's Assets by $420 Million." "Superior, a suburban Chicago savings and loan, collapsed in early 2001 under the weight of half a billion dollars in subprime loan defaults and improper accounting that had overstated the thrift's assets by $420 million." [Forbes, 11/5/02]

• Penny Pritzker’s Website