SEATTLE -- Unpaid bondholders in two defunct nuclear power projects filed a $7.25 billion lawsuit against the state of Washington Tuesday for certifying bond issues that led to the largest municipal bond default in the nation's history.
The class action suit alleges state officials acted fraudulently and negligently in approving 14 separate Washington Public Power Supply System bond issues from 1977 to 1981, as well as violating a number of state laws.
Investors, who were promised an average return of 8 percent for their money, hold more than half of the $2.25 billion in bonds sold for WPPSS plants 4 and 5, which were forced into termination in 1982.
More than 70,000 bondholders have not been paid. The $7.25 billion claim represents principal and interest on the bonds.
The suit filed in King County Superior Court is the largest lawsuit ever filed in the United States against any municipality, said Arthur Hoffer, chairman of the National Bondholders Committee, which represents 12,000 investors.
'This issue is not going to go away,' Hoffer said. 'State officials cannot put their heads in the sand and avoid responsibility for the WPPSS fiasco.
'Thousands of innocent people have been victimized. Every day we get reports from around the country about people experiencing extreme financial hardship from the WPPSS default.'
Hoffer said court rulings that WPPSS participant utilities lacked authority to guarantee the bonds are 'ludicrous.'
'It's like saying that a reckless driver in an automobile accident isn't liable because he didn't have a valid driver's license,' he said. 'The fact is that the bonds were sold with the utilities' guarantee and with the state of Washington's certification.'
Rulings in King County Superior Court, upheld last year by the Washington Supreme Court, released member public utility districts in WPPSS from obligations to pay off the bond indebtedness and interest.
The courts ruled the PUDs had no authority to indebt their ratepayers in 'hell or high water' contracts that obligated them to pay whether or not the plants were ever built.
The rulings left WPPSS with no way to collect money to pay its construction bills on WPPSS nuclear plants 4 and 5 and triggered its municipal bond default in July of 1983, the largest in U.S. history.
