Ex-Officers of Beverly Hills Thrift Face Suit
The former management of Beverly Hills Savings & Loan Assn. and the firm’s former outside auditors, the accountants Touche Ross, have been sued in a stockholders’ class action alleging that the S&L;’s stock price was “grossly inflated” since 1982 by misleading reports of its condition.
An outgrowth of the firm’s disclosure Tuesday that its liabilities now exceed its assets by $65 million because of write-offs being taken in its 1984 financial statements, the suit was filed by shareholder Seymour Lazar in Los Angeles County Superior Court late Thursday against Touche Ross and eight of the S&L;’s former officers and directors.
Touche Ross audited the company in 1982, 1983 and in 1984 until being replaced Nov. 12. Although completion of the S&L;’s 1984 audit by Coopers & Lybrand has been delayed, the current management said it will report a loss of about $100 million.
The complaint alleged that, as the S&L;’s auditors, Touche Ross had access to confidential internal records that disclosed “breaches of duty, mismanagement and negligent misrepresentation.” A spokesman at Touche Ross’ offices here said no one was available Friday to comment on the suit.
Another defendant, Dennis M. Fitzpatrick, the S&L;’s chairman before last year’s successful takeover fight by developer Paul Amir, said he had not seen the suit and could not comment. Other defendants could not be reached.
Before over-the-counter trading in the company’s stock was halted in mid-session Tuesday, it was trading at $3.25, a 25-cent drop from a day earlier. Trading has not been resumed.
Deposits of up to $100,000 in the institution are insured by the Federal Savings and Loan Insurance Corp., but the firm’s stockholders could lose much of their investments, industry observers say. The Amir management has agreed to give the FSLIC a large measure of control over important business decisions and to accept a merger partner if the FSLIC presents one. State and federal auditors are inspecting the firm’s affairs.
The suit alleged that in 1982 or earlier Beverly Hills S&L; and the officers and directors named were acquiring “very large real estate investments” for the firm, “many of which were over-appraised and were improperly reflected on” its financial statements.
It added that in order to make the company grow quickly, to obtain loan fees and “to give the appearance of enormous success,” the firm under its former managers was making real estate loans and acquiring real estate for investments “at a very rapid pace and with little or no regard for the true value of the properties.”
