Clark County has so far recovered about two thirds of a $976,700 court deposit lost when the Bank of Clark County failed almost two years ago. But taxpayers and Clark County Clerk Sherry Parker could ultimately be on the hook for the remainder, roughly $340,000, according to attorneys involved with the case.
Parker, who handles all the court’s financial transactions, deposited the money at BOCC in 2008 on behalf of defendants in a decade-long lawsuit over soil contamination at the Battle Ground Shopping Center. Those defendants, Douglas Ray and Irwin Jessen, owners of the shopping center, lost the case and were required to put up the money to cover damages in case their appeal was denied.
The account was seized by the Federal Deposit Insurance Corp. along with the bank’s other assets. When the county went after the funds, questions arose over whether the money should be considered public or private, and thus subject to the $250,000 insured limit on private deposits.
The county has since recovered from the FDIC all of the deposits it held at BOCC, except the funds related to this lawsuit.
The FDIC decided the court deposit wasn’t public money, but agreed to cover $250,000 for each of the two codefendants as a concession, according to county deputy prosecutor Chris Horne. The federal agency also agreed to provide an additional $132,000 from the sale of a portion of the bank’s assets, bringing the total to $632,000, Horne said.
The county’s request for the state’s help under the Washington Public Deposit Protection Act also failed to recover additional funds.
“We can’t make up funds that the FDIC doesn’t determine to be public,” said Washington State Treasurer Jim McIntire. “It’s certainly a complicated circumstance that nobody in the state saw coming and few people understand how the FDIC determines what are public funds and what are private funds.”
It’s unclear now who will be responsible for the remaining $344,700: the FDIC, Clark County taxpayers and Parker herself, or the defendants.
The FDIC hasn’t yet completed the sale of BOCC assets, leaving potential for more payouts to uninsured depositors, Horne said. But a court will likely be called on to completely settle the dispute, he said.
On the hook
The defendants hold Parker responsible, arguing that she was in charge of depositing the money and ensuring its safety.
“It’s disappointing when my client stepped up to the plate and paid the bond, then the county lost the funds,” said Todd Mitchell, an attorney for the defendants.
They could seek a court judgment against the $250,000 bond she holds as an elected official in Clark County, Horne said. The bond is backed by the county’s general fund and paid for with taxes.
They could also go after Parker personally — a possibility she says she’s prepared for.
“I don’t think it would come to that,” Parker said. “Our contention is, it’s public money and it should be covered by the FDIC. But obviously, that’s what courts are for.”
The defendants could also be held accountable, because they didn’t request that the money be placed in separate accounts, Horne said. Parker was following a court order.
In the event of a lawsuit, the court has little precedent to guide a decision, Horne said. Washington courts ruled in a 1934 case that the court clerk was absolutely responsible for the money, but that was back in the day when the clerk stowed the money in a safe and guarded it, he said. A lot has changed since then.
Meanwhile, the Battle Ground Shopping Center lawsuit, and a related lawsuit over the sale of an adjacent parcel to developer Dean Maldonado, have intensified in recent months.
The case dates back to December 2001, when Bruce Feldman, manager of Battle Ground Plaza LLC, agreed to purchase the Battle Ground Shopping Center, on the southeast corner of state Highway 503 and Main Street, from Ray and Jessen for $3.29 million. Subsequent environmental studies found pollutants in the soil near a convenience store-gas station and a dry-cleaning business. Battle Ground Plaza sued for the cleanup and attorney fees.
The trial court eventually ruled in favor of Battle Ground Plaza, and the defendants appealed and submitted the funds to pay the judgment should their appeal be unsuccessful.
The outcome of these property disputes will ultimately decide what happens with the recovered funds.
“This litigation isn’t done yet,” Horne said.