Fraud Charged in $15-Million Action : Beverly Hills S&L; Sues Financier

Beverly Hills Federal Savings & Loan has filed a $15-million lawsuit, alleging fraud and racketeering, against Swiss financier Werner K. Rey and six companies that he controls.

The suit, filed late Thursday in U.S. District Court in Los Angeles, alleges that Rey traded $10 million of “substantially worthless” debentures to Beverly Hills Savings for properties worth millions of dollars before the association’s collapse in April.

On April 23, the Federal Savings and Loan Insurance Corp. seized Beverly Hills Savings, declared it insolvent and installed new management. The thrift was then reconstituted as a federally chartered mutual association.

As part of its lawsuit, Beverly Hills Savings is seeking a court order preventing Rey from selling any of the hotel, apartment and other properties that he acquired from the association.

The suit alleges that Rey, 42, “exacted substantial profit from plaintiffs by means of fraud, misrepresentation and violation of state and federal securities laws.”

Rey, who is no stranger to financial controversy, had a lengthy association with Beverly Hills Savings. In late 1983 and early 1984, he acted briefly as a “white knight” when dissident shareholders, led by Paul Amir, attempted to take over the association.

Curtis Hoxter, Rey’s New York representative, said he was not aware of the lawsuit. Hoxter said Friday that Rey was in Europe and could not be reached for comment.

“We want the properties we gave him back,” said Henry Silberberg, the attorney for Beverly Hills Savings. He said the properties are in California, New York, North Carolina, Connecticut and elsewhere. He said he could not put an exact value on properties in dispute.

Rey’s dealings with Beverly Hills Savings occurred between 1982 and 1985, according to the suit.

During Amir’s takeover attempt in January, 1984, Beverly Hills Savings sold Rey a convertible debenture worth $20 million. As part of the deal, Beverly Hills Savings also bought several real estate interests from Rey affiliates for $24.2 million, including $18 million in cash. Beverly Hills Savings later gave Rey the disputed properties as partial payment on the $20-million convertible debenture. Silberberg said the association contends that it “came out on the short end” when it gave Rey the properties because the debentures that he held were virtually worthless as the S&L;’s financial condition worsened.

The original debenture deal was designed to increase Rey’s stake from 9.9% to 25.6%, but in January, 1984, Rey abruptly withdrew his application to state and federal regulators to obtain a controlling interest in the association.

Rey’s opponents said he would be an unsuitable controlling stockholder because in 1977 the Swiss banking commission revoked the license of his Overseas Development Bank. That same year, he had completed an unfriendly takeover of C. F. Bally, the Swiss shoe company, and was accused of trying to drain the company’s assets. Nine months after he acquired a majority interest in Bally, he was forced to sell it.