PSFS shareholders face a final hurdle before payout

Frank P. Slattery Jr., who has spearheaded a nearly 20-year effort to win compensation from the federal government for its 1992 seizure of the Philadelphia Savings Fund Society, has one more hurdle to clear before a $276 million award can be paid to PSFS shareholders.

"We're now at the point where we're asking for a final order from the trial judge," Slattery told 87 former PSFS employees Monday at an annual gathering in the company's old boardroom atop the PSFS tower on Market Street.

"That will occur on Sept. 30," Slattery said.

But then nothing has been simple in the case, which started in 1993 and has produced some setbacks but, more important, four court victories that have the federal government on the verge of the big payout to PSFS investors.

The remaining hurdle is Steven Roth, a former director of Meritor Financial Group, the corporate name PSFS adopted in 1985. Roth has argued in the U.S. Court of Federal Claims in Washington that what is left of the $276 million after expenses should be split among investors who held the company's shares at the time of the seizure and sale of PSFS to Mellon for $181 million - even if they have since sold the stock.

The $276 million in compensation was awarded after Slattery, who was a large shareholder and a director, successfully argued in court that regulators broke a 1982 agreement on capital when they took over Meritor. Slattery wants the benefit to go only to current shareholders.

Roth owned 1.7 million shares of Meritor stock when the bank was seized in December 1992 but sold them in September 1993 at a loss, a court filing last month said.

The shares have continued to trade publicly and are currently at about $4.20.

If Roth were to succeed, his effort would help William Messick, a Mickleton, Gloucester County, businessman who owned 9,500 Meritor shares but sold them for a penny each in February 1993, on the recommendation of his broker at Butcher & Singer, which had promoted the stock to clients in 1983, when PSFS went public.

Slattery expressed confidence that his lawyers would be able to dispose of Roth's objection in court. "I don't think that will be very difficult at all, but we will see," he said.

If the judge signs the order Slattery plans to propose Sept. 30, the federal government will have to pay $276 million to the Federal Deposit Insurance Corp. receiver for Meritor.

From that point, interest will accrue until the FDIC receiver establishes a distribution procedure and pays the money to investors who have original stock certificates or have shares held at a brokerage.

"If you do not have either of those, it is problematic as to whether they will pay you or not," Slattery said.

Slattery said that meant there were some shareholders "who are not going to have their certificates anymore and are not going to have an electronic brokerage account, and they are not going to be paid."

In all, it is estimated there are 3,000 shareholders in the company, which began in 1816.