Downey Financial settlement with directors, officers accepted by court

By Jim Witters

Wilmington, Del., Feb. 21 - A $5.25 million settlement between Downey Financial Corp.'s Chapter 7 trustee and 12 of the company's former directors and officers received court approval Tuesday, according to documents filed with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the settlement calls for the Chapter 7 trustee to receive $5.25 million from insurance carriers on behalf of the former officers and directors to resolve any and all claims that may have been or could have been alleged by the trustee in a breach of fiduciary duty action.

The trustee agreed to reimburse the defendants' out-of-pocket expenses up to $100,000 for their cooperation in the trustee's pursuit of other actions, the filing stated.

Newport Beach, Calif.-based Downey Financial filed for bankruptcy on Nov. 26, 2008. Its Chapter 7 case number is 08-13041.

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