West Allis - Millions may be on the way to the West Allis-West Milwaukee School District from a possible settlement of a lawsuit filed in 2008.
In the lawsuit, West Allis and four other school districts alleged that the Royal Bank of Canada and the districts' banking adviser Stifel, Nicolaus & Co. Inc. sold them investments that were much more risky than they were led to believe. The investments became worthless in the 2008 recession.
The defendants contend that the districts were given complete information about the investments, including that they might not get their money back.
The $200 million in investments were complex financial instruments known as collateralized debt obligations, or CDOs, that the districts bought in 2006.
Now West Allis and the other districts appear to be in line for a settlement. Parties are extremely reluctant to say that the end may be soon, but C.J. Krawczyk, attorney for the districts, confirmed that agreements have been reached in principle. However, multiple approvals are needed, he said.
Those approvals involve the five districts, the Royal Bank of Canada, Stifel and the federal Securities and Exchange Commission, he said. So far, no approvals have been given, although the West Allis-West Milwaukee School Board had planned to vote on the proposed settlement Monday. That vote was put off because some documents were not quite ready, Krawczyk said. "There is no reason to be concerned."
The other districts are Kenosha, Kimberly Area, Waukesha and Whitefish Bay.
The five districts already reached a settlement with Stifel in 2012, with Stifel agreeing to pay the districts a total of $13 million and providing a letter of credit for $9.5 million more when the related case against it brought by the SEC was settled.
The districts and the SEC both sued Stifel and the Royal Bank of Canada in separate lawsuits over the sale of the CDOs. While the districts settled with Stifel but not with the bank, the SEC settled with the bank but not with Stifel.