Settlement OKd for Financial Corp. of America : Thrifts: IRS claims are resolved. The S&L;’s creditors will receive up to 10 cents on the dollar.

Financial Corp. of America, once a high-flying savings and loan holding company run by maverick money man Charles W. Knapp, on Wednesday won court approval of a settlement that will allow it to repay bondholders and other creditors up to 10 cents on the dollar.

The settlement of the Internal Revenue Service claim resolves a lengthy saga for the company that built the nation’s largest thrift, American Savings & Loan, with risky loans and investments.

The agreement paves the way for the trustee for now-defunct FCA, which filed for bankruptcy protection in 1988, to pay $9 million to creditors and close the estate.

“After all these years, that’s better than nothing--and nothing is what we were looking at before,” said Pamela Webster, a lawyer representing the bondholders’ interests.

David M. Gill, the trustee for the bankrupt estate, said that until Wednesday, he had no idea whether there would be any money available to pay the nearly 8,000 minor investors who were left holding about $80 million in FCA bonds when the company went bankrupt.

Under the settlement in U.S. Bankruptcy Court in Santa Ana, the IRS, which originally sought $301.2 million, will have a claim for $26 million. The tax agency will take $6 million immediately and share the remainder with creditors after administrative costs are paid.

Gill and local IRS officials reached the agreement two years ago, but he had to fight to save the deal through numerous reviews by higher officials in the tax agency and the Justice Department. Recently, the congressional Joint Committee on Taxation approved the settlement.

A year’s worth of work remains, however, to determine the exact number of unsecured creditors and how much is owed each one.

Gill, with his law partner Richard Diamond acting as his attorney, collected more than $28 million from legal proceedings against the government and others. Ironically, the biggest single chunk--$10 million--came from the federal government. Diamond had argued that regulators wrongly seized and sold FCA property when they took over American Savings.

FCA still has about 1,000 unimproved residential lots for sale in an area near the boundaries of Los Angeles, Kern and San Bernardino counties, but the land is estimated to be worth less than $500,000. The estate has spent about $2 million for various services, including legal, accounting and brokerage fees.

American Savings & Loan was seized in late 1988, recapitalized by Texas billionaire investor Robert Bass and renamed American Savings Bank.