Assets of Bevill, Bresler Affiliates Frozen
A federal judge Tuesday froze the assets of three affiliates of the failed government securities dealer Bevill, Bresler & Schulman Asset Management of Livingston, N.J.
Asset Management had been placed under protection of the U.S. Bankruptcy Code on Monday, and regulators estimated that it owes at least $140 million to customers.
In Los Angeles, a spokeswoman for Security Pacific Corp. said a subsidiary of the bank holding company had about $30 million in outstanding loans to Asset Management but did not risk any losses.
When the securities firm closed Monday, it owed $30 million on a revolving credit line to Security Pacific Clearing & Services, a major New York-based clearing company for government securities dealers. The company is a subsidiary of Security Pacific Corp., the Los Angeles-based parent of Security Pacific Bank.
The spokeswoman said, however, that the loans were “fully collateralized. We hold securities from them in at least that amount.”
She added that Security Pacific Clearing had been in a similar position when ESM Government Securities collapsed last month but recovered all of its $9 million in loans to the Florida-based firm. The ESM failure triggered a banking crisis in Ohio.
In the wake of Asset Management’s bankruptcy filing, savings and loan associations across the country tried to assess the impact of the filing.
The Securities and Exchange Commission has alleged that Asset Management, four affiliates and five officers misrepresented the financial status of Asset Management and failed to disclose it could not meet obligations to customers.
U.S. District Judge Dickinson Debevoise had frozen the assets of Asset Management on Monday and he did the same Tuesday for BBS Government Securities Group, Bevill, Bresler & Schulman Government Securities and BBS Securities Group.
The SEC also asked the judge to take away the officers’ control of three of the companies in order to protect customers. The judge named New York attorney Saul S. Cohen as a trustee for Asset Management and as receiver for two affiliates--BBS Government Securities Group and Bevill, Bresler & Schulman Government Securities.
Most of Asset Management’s customers are small savings and loans and banks, but officials at several of the institutions said the loss would be minimal.
The Federal Reserve Board in Washington said problems had not been reported at financial institutions in the wake of the filing and related court action.
John Moffatt, vice president at Fort Lee Savings & Loan in Fort Lee, N.J., which is owed $19.3 million, reported a “slight run” at his thrift Tuesday. He said it was difficult to sort out nervous customers from those withdrawing money to pay taxes.
But he said that the accounts are federally insured and that there would be “no adverse affect on customers.”
John Domeier, chairman of Great American Savings & Loan, a federally insured institution in Oak Park, Ill., (no relation to San Diego-based Great American Federal Savings Bank) which was listed as a $30-million creditor, said his thrift probably would suffer no losses.
Like executives at other thrifts, he said the securities were being held at a bank for safekeeping.
Dennis E. Finnegan, senior vice president at Merritt Commercial Savings & Loan in Baltimore, said his institution’s potential $2.2-million loss is only a fraction of its assets of more than $300 million.
A Maryland official said Merritt has insurance coverage through the privately run Maryland Savings Share Insurance.
Ira Sorkin, SEC regional administrator, declined to comment on whether any of the assets of another Asset Management affiliate, the regional brokerage firm of Bevill, Bresler & Schulman, were involved in Asset Management’s operations.
But he said some Asset Management creditors thought they were dealing with the brokerage firm, which is federally regulated, but actually were dealing with Asset Management, which is not.
He added that the principals in the brokerage firm were the same as those in Asset Management and that the SEC is investigating.
