Bondholders who had pursued the Washington Public Power Supply System through the courts for five years have let WPPSS off the hook just before trial, claiming ``you can't get blood out of a turnip.'' Plaintiff attorneys said the deal with the supply system announced Wednesday will gain the cooperation of WPPSS employees, who will be leading witnesses when the securities fraud trial starts Sept. 7 in Tucson, Ariz. WPPSS agreed this week to settle litigation against it over the system's $2.25 billion bond default in 1983. The bonds were sold to finance construction of two nuclear power plants, which were never completed. The trial was moved to Tucson after judges in Seattle excused themselves because of possible perceived conflicts of interest and because some feared it would be impossible to get an impartial jury to hear the case. Thousands of people in Washington lost money because of the default. Bondholders agreed to drop claims against WPPSS in return for access to accounts for the terminated power plants, Nos. 4 and 5, containing millions of dollars. Remaining defendants include 20 public utilities in Washington and one in Oregon that participated in building the plants, three engineering firms and a firm that had provided WPPSS with financial advice. The abrupt pullout of WPPSS caught other defendants by surprise, and one acknowledged consideration was being given to requesting a trial delay. ``We're surprised they (WPPSS) didn't stay and defend their actions ...,'' said Chuck Shigley, administrator for the Snohomish County Public Utility District. WPPSS paid no money in the tentative settlement, but agreed that it has an obligation to pay the face value and interest on the bonds _ which total about $3 billion. ``Since you can't get blood out of a turnip, why not get all the other benefits you can,'' said Mel Weiss, representing class action plaintiffs in the giant lawsuit. However, the agreement noted that because of limited assets pledged to secure the bonds, there was ``no expectation'' the money would ever be paid. The WPPSS Executive Board was expected to approve the agreement when it meets Friday in Richland, Wash., in a special meeting, said Carl Halvorson, board chairman. ``It's a very favorable settlement for the supply system,'' he said. The tentative settlement, which also requires the approval of presiding U.S. District Judge William D. Browning, protects WPPSS' other assets against any further judgments in the case. In the legal action, bondholders sued the supply system, 88 utilities, bond underwriters, various directors and managers, engineering firms and advisors after WPPSS defaulted on $2.25 billion worth of bonds. Many defendants have settled over the past year, including bond underwriters and more than 60 utilities. They have agreed to pay a total of $331 million and may face further liabilities. The terminated plants are located at the Hanford nuclear reservation and Satsop, west of Olympia. Meanwhile, Browning ruled Wednesday in Tucson that bondholders are permitted to try to prove they should be fully refunded for the bonds they bought. Common law and state law permit rescission, or refund, damages, Browning said in his nine-page order. Claims under the federal Securities Act allow only for out-of-pocket losses, Browning said. That means the difference between what the bondholder paid and what the value of the bonds were. In both instances, the bondholders will be allowed to try to prove that because of misrepresentations, they bought bonds that otherwise would not have been put on the market and therefore should get full refunds plus interest.
