Conflict Issue Raised in Beverly Hills S&L; Case : Bank Board Counsel Raiden Admits Signing Documents Relating to His Former Client

The Federal Home Loan Bank Board’s general counsel acknowledged Friday that he had signed at least 10 documents relating to Beverly Hills Savings & Loan Assn., a firm he once advised as a private attorney, even though he had officially removed himself from matters involving the institution after joining the government.

The testimony by former Los Angeles attorney Norman H. Raiden was made before a House subcommittee hearing into the thrift’s decline into insolvency and the bank board’s rescue of it last April.

Rep. Ron Wyden (D-Ore.) said he and other members of the House Energy and Commerce oversight subcommittee are seeking to learn why the S&L; “was permitted to get away with financial shenanigans while federal regulators sat idly by, doing nothing.”

Real Estate Deals Soured

Rep. John D. Dingell (D-Mich.), the subcommittee chairman, said Raiden’s actions may have represented “a significant conflict of interest.”

The panel previously found that two other former officers of the firm, Robert E. Newberry and Robert A. Steele, may have been involved in financial conflicts as the firm plunged toward insolvency by investing in $400 million in real estate deals that went sour.

Edwin J. Gray, chairman of the bank board, defended Raiden as “a man of integrity.” Gray told the subcommittee that the board was severely handicapped in its supervision of S&Ls; by a shortage of banking examiners. Dingell said he would support congressional approval for more personnel to avoid “jeopardizing the nation’s financial system.”

Raiden, who was outside counsel to Beverly Hills S&L; before his federal appointment in late 1983, has long maintained that he recused himself from all matters involving the thrift at the bank board. He reiterated to the subcommittee Friday that “no matters involving Beverly Hills Savings were or have been brought to me.”

Documents Produced

But Raiden began amending his unequivocal statement when Wyden began detailing, one by one, bank board documents relating to Beverly Hills Savings that Raiden had signed in 1984 and earlier this year.

“Isn’t this at odds with your recusal?” Wyden asked repeatedly as he produced documents in which Raiden had interpreted federal regulations affecting the thrift, had offered legal advice on the use of brokered funds by Beverly Hills Savings and had approved issuance of more than $20 million in subordinated capital notes that had the effect of increasing the thrift’s net worth.

In reply, Raiden said some of the memos dealt with the newly bailed-out thrift now known as Beverly Hills Federal Savings & Loan, which he said was not his former client. He added that other documents were not substantive or referred to specific issues involving Beverly Hills on which he had never worked as the thrift’s private attorney.

But Dingell, referring to Raiden’s signing off on the legality of the $20-million debenture issue in 1984, told him: “You are conferring upon them approval.”

Added Wyden: “Your signature is all over documents that are material to Beverly Hills Savings & Loan.”

Raiden, in response to other questions, said he never had put his recusal in memorandum form to circulate at the bank board but had only told his colleagues not to bring him matters involving his former S&L.; He said that he made a sincere effort to avoid conflicts and believed that he had been successful.

The controversy involving Raiden was the second of its kind since he joined the government. Last year it was disclosed that his former Los Angeles law firm, McKenna, Conner & Cuneo, which has represented S&Ls; nationwide, paid him $150,000 a month after he took his government job to reflect his “extraordinary” past service to the law firm.

The Office of Government Ethics cleared Raiden of any impropriety in connection with the payment.