Beverly Hills S&L; Faces $100-Million Loss in ’84

Beverly Hills Savings & Loan Assn., which was taken over last year in a bitter proxy fight, disclosed Tuesday that it is facing a $100-million loss for 1984, most of which it attributed to write-offs on real estate loans.

The loss would result in an estimated negative net worth of about $65 million, it said, meaning that its liabilities would exceed its assets by about that amount. According to interim figures as of March 31, Beverly Hills S&L; had assets of about $2.93 billion and liabilities of $3 billion.

Beverly Hills Savings said it has entered into a consent agreement to consult with the Federal Savings and Loan Insurance Corp. before undertaking any major transactions. The agreement also could result in a merger or acquisition by outsiders, the company noted.

The company said it has $2.4 billion in deposits, which are insured by the FSLIC. Spokesmen for the FSLIC and the industry regulator, the Federal Home Loan Bank Board, both declined to answer questions, saying it was against policy.

The company, whose chairman and largest shareholder is Beverly Hills developer Paul Amir, attributed a “major portion” of the anticipated loss to write-offs and reserves ordered by its outside auditors on loans and other transactions going back to 1983 under prior management.

Damage suits will be filed against “certain” former executives and directors, according to spokesman Terry N. Christensen, a company director and attorney.

However, Dennis M. Fitzpatrick, the company’s chief executive for six years before Amir’s takeover, rejected “any implication that this is the fault of prior management.” He added that it “is the fault of the current management.”

Amir took control of the thrift on April 11, 1984, after a bitter proxy fight. The company’s last proxy statement showed that he invested about $12 million in acquiring 621,700 shares, or about 17% of its stock.

“We will try to save the company,” he said Tuesday in an interview. “We will try to find someone who will come in with some infusion of capital.”

He conceded that this would not be easy in light of the expected $100-million loss, which he said “really surprised” him.

Former Chairman Fitzpatrick said he was “very shocked” to hear the figure.

Meanwhile, Michael P. Flaherty, president and chief executive, said that the thrift expects to record a first-quarter profit of at least $2 million and that management “will make every effort to turn the association around.”

Flaherty said he expects the 1984 audit to be completed within a week. The company has switched auditors, using Coopers & Lybrand instead of Touche Ross, which audited its 1983 books.

Christensen blamed the former management’s real estate loans and the making of acquisition deals “as fast as humanly possible in 1982 and 1983” for the company’s current plight.

“The people who brought them in had no ability to analyze them and apparently couldn’t even appraise them accurately,” the company spokesman said of those deals. “They certainly couldn’t supervise them properly after acquiring them.”

During the proxy fight, court documents filed by Amir accused the company’s previous management of improprieties in real estate deals with Werner Rey, the Swiss national who had been brought in as management’s intended “white knight.” Rey later dropped out of the takeover fight.

Beverly Hills Savings did not cite any specific transactions Tuesday in discussing its intention of suing some of the past management. In answer to a question, Christensen said the Rey-related real estate matters were not involved “at this point.”

He said, without elaborating, that some properties involved in the company’s loans were inadequately appraised. He also noted that part of the company’s write-offs would involve its financing of developer Doug Manchester’s new Hotel Inter-Continental in San Diego.

Fitzpatrick, Beverly Hills S&L;’s former chief executive, said in response to a question Tuesday that he had purchased a 1% interest in the San Diego hotel and had represented Manchester as a consultant, both after leaving the thrift’s management last June.

As for allegations against past managers, Fitzpatrick said: “We followed sound underwriting procedures, including having appraisals by top-flight firms.”

Of the impending loss, Fitzpatrick said he believes that it is “a culmination” of the proxy battle.

“I believe they’ve been shown to be grossly inept and inadequate as managers,” he said. “I think that when you take a company that is dynamically run and where management is a very important ingredient to success and spend a long period of time attacking that management and then take over and replace that management with nothing, the result is not very likely to be very good.”