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GLENDALE FEDERAL BANK COMMENTS ON APPELLATE COURT RULING

 GLENDALE, Calif., May 25 /PRNewswire/ -- In a two-to-one decision reached today, the U.S. Court of Appeals for the Federal Circuit reversed the July 1992 judgment of the U.S. Court of Federal Claims in favor of Glendale Federal Bank in its supervisory goodwill litigation against the United States. In its decision, the Court majority ruled that the government was not liable for breach of contract, but remanded the case for trial of Glendale Federal's constitutional and other claims.
 Stephen J. Trafton, chairman and chief executive officer of Glendale Federal Bank, said, "We are disappointed that the Court of Appeals majority chose to reverse the decision of the Court of Federal Claims. We believe the Court of Federal Claims properly decided the breach of contract issue involved in our case, and we intend to seek further review of the appellate decision in order to reinstate the Court of Claims' judgment in our favor."
 Trafton noted, "The majority opinion explicitly recognized that Glendale Federal came to the government's aid in 1981 by taking over an ailing Florida thrift and that supervisory goodwill was critical to that transaction, yet it held that Congress and the regulatory agencies were free later to change the rules and eliminate goodwill from Glendale Federal's capital accounts. We believe that conclusion is wrong, for the reasons cogently stated in Judge Newman's powerful dissenting opinion, and will not withstand further appellate scrutiny."
 In separate proceedings before the Court of Federal Claims earlier this year, Glendale Federal Bank presented documentation of $1.4 billion in damages which the bank said was caused by the government's breach of contract. Glendale Federal Bank also has proposed an out-of-court settlement to the government for approximately half of the damages claimed by the bank.
 Trafton commented, "We continue to believe that a settlement is still in the best interest of the government, American taxpayers, the bank and all of its constituencies, and we will pursue our efforts to settle the lawsuit against the government."
 In the meantime, Glendale Federal is continuing efforts to comply with the Office of Thrift Supervision (OTS) requirements that it raise additional capital by June 30, 1993. Trafton stated, "While the supervisory goodwill case is important, we continue to focus on our primary objective of successfully completing the recapitalization of the bank. We have made progress in adding capital already, and our primary regulators have told us that they will extend the June 30 deadline if we can continue to make significant progress in recapitalizing the bank. As important as the goodwill case is to all the stakeholders of the bank, the highest priority for the board of directors and Glendale Federal employees has been and will continue to be the private recapitalization of the bank."
 The contract that is the subject of Glendale Federal Bank's case was entered into in 1981, when the government induced the bank to merge with a failing Florida thrift as a means of avoiding a potential resolution cost which the government estimated at $783 million. The government promised to allow the bank to include in its regulatory capital the goodwill resulting from the merger, subject to amortization over a period of 40 years.
 However, the government reneged on its promise as a result of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), which mandated the phaseout and elimination of the supervisory goodwill within a five-year period.
 Glendale Federal Bank is the primary subsidiary of GLENFED Inc.
 -0- 5/25/93
 /CONTACT: Judy Cunningham, 818-500-2274, or Jeff Misakian, 818-500-2824, both of Glendale Federal/


CO: Glendale Federal Bank; GLENFED Inc. ST: California IN: FIN SU:

LS-JB -- LA032 -- 2301 05/25/93 16:17 EDT
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Publication:PR Newswire
Date:May 25, 1993
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