High Court Refuses to Review Car Magnate Lawsuit

A 13-year-old lawsuit by car dealership magnate Bruton Smith has been brought to a close by the U.S. Supreme Court, which affirmed a lower court ruling that Smith had no standing to sue the federal government over losing millions in the 1990 failure of North Carolina Federal Savings and Loan.

Smith, who is CEO of Speedway Motorsports Inc., which owns six NASCAR tracks, was seeking $28 million in damages and $3 million in restitution, the Associated Press reported.

Smith lost his 49.9 percent investment in NCF Financial Corp., a holding company for N.C. Federal, which collapsed. N.C. Federal had acquired the assets of North Carolina Federal Savings and Loan Association in 1982.

The case is connected to the savings and loan crisis of the early 1980s, which brought down 400 S&Ls. High interest rates paid on deregulated savings accounts overtook the low returns earned on fixed-rate mortgages, leading to collapses, the AP reported.

In turn, the federal government encouraged thrifts to take over the bankrupt, or nearly bankrupt, thrifts. The buyers were allowed to count the difference between the bankrupt S&Ls' liabilities and assets toward their own capital reserve requirements in an arrangement called “supervisory goodwill.” That maneuver made the thrifts look to be in better financial health than they actually were. That accounting move was later banned by Congress in 1989, leading to another series of S&L collapses. N.C. Federal was among them.

Smith sued, saying in part that “the government dangled the prospect of supervisory goodwill in front of the Smith” and other shareholders “to induce their approval” of the 1982 merger.

U.S. Court of Federal Claims Judge Lawrence Block ruled in October 2003, however, ruled that the Smiths were not part of the negotiations that resulted in the merger and had no standing to sue the government.

"There is simply no contractual relationship between the Smiths and the government" with regard to supervisory goodwill, Block wrote.

The CPA Journal wrote that the regulatory incentives explain the willingness of buyers to acquire thrifts that had a negative market value. “It also provides some insight into the nature of the 'goodwill' itself. These incentives were, in substance, regulatory "breaks" delivered under the banner of additional forbearance.”

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30
Many Excel users have a love-hate relationship with workbook links. For the uninitiated, workbook links allow you to connect one Microsoft Excel spreadsheet to other spreadsheets, Word documents, databases, and even web pages.