HEI, thrift resolve lawsuits with broker
By Deborah Adamson
Advertiser Staff Writer
Hawaiian Electric Industries and its subsidiary, American Savings Bank, this week settled all lawsuits with a Mainland broker over the purchase of debt securities later deemed to be illegal for federal savings banks.
Terms of the settlement with PaineWebber, now called UBS Financial Services, were not disclosed. However, HEI and the thrift will receive undisclosed sums that will be included in 2003 fourth-quarter financial statements, according to a Securities and Exchange Commission filing.
"They (PaineWebber) had sold us securities with the understanding that it was permissible for thrifts to own them," said Suzy Hollinger, HEI's manager of investor relations. "They were not permissible."
Calls to the New York-based broker's parent, UBS, were not returned yesterday.
In June 2000, the Office of Thrift Supervision, informed American Savings Bank that its ownership of $114 million in four trust certificates was not allowed.
The certificates were purchased from PaineWebber and another broker. The certificates were related to pools of corporate debt, but not all aspects of the certificates were rated, Hollinger said. Debt is rated to reflect the repayment ability of the borrower.
American Savings Bank resolved the matter with one broker, but it sued PaineWebber in 2001 after the financial services firm refused to rescind the transactions, according to the regulatory filing.
The broker countersued.
In the meantime, to comply with federal regulations, American Savings Bank sold what remained of the securities to HEI because it couldn't find other buyers.
The transaction led to net losses for HEI of $8.5 million for the writedown of the securities from the second half of 2001 to Sept. 30, 2003.
In September, HEI filed a separate lawsuit saying PaineWebber was "unjustly enriched" if the company's purchase of the securities reduced the broker's liability to the thrift.
The parties settled their disputes shortly before the start of the trial on American Savings Bank's lawsuit.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
