SEC Charges 2nd Ex-FCA Executive : Agency Claims Borer Engaged in Illegal Insider Trading
The Securities and Exchange Commission on Tuesday charged a second former official of Financial Corp. of America, John J. Borer Jr., with illegal insider trading in FCA’s stock while he was a board member of American Savings & Loan Assn., FCA’s principal subsidiary.
The SEC said Borer and his family sold nearly 40,000 shares of FCA stock last winter after he learned that FCA was expecting to report a huge loss for 1984. By acting before the news was made public, Borer avoided losses of $57,535, the SEC said.
As is often the case in such SEC cases, Borer settled without admitting or denying the allegations. He did, however, agree to pay $115,070, which represents the losses he avoided and a fine of the same amount.
Borer, a former general counsel of FCA who is now a financial consultant in Rancho Santa Fe, could not be reached for comment.
On Monday, the SEC charged FCA founder Charles S. Offer with illegal insider trading stemming from the 1983 merger of FCA and First Charter Financial Corp. As part of his settlement, Offer agreed to forfeit profits of $3,625.
Borer was FCA general counsel from 1973 until 1983. He remained a consultant and board member of FCA and American Savings through most of 1984 and was often called on to be lead negotiator in delicate talks between FCA and two federal regulatory agencies, the SEC and the Federal Home Loan Bank Board.
In the summer of 1984, the SEC forced FCA to restate its quarterly net income to show a large loss, sparking a large deposit run, and the Home Loan Bank Board forced FCA Chairman Charles W. Knapp to resign.
Borer resigned as a director of FCA in October, 1984, and left American’s board in May, 1985. The two boards were merged last year by William J. Popejoy, FCA’s new chairman.
The SEC’s case against Borer alleges that he learned at a joint meeting of the FCA and American boards on Feb. 26, 1985, that FCA was expecting an annual loss of between $400 million and $700 million. Armed with that information, Borer and his family sold 39,795 shares between Feb. 27 and March 7, 1985, the SEC said. On March 8, FCA announced that it expected to report a year-end loss of between $500 million and $700 million. The eventual loss was $591 million, the largest in the history of the savings and loan industry.
The SEC also charged Offer with selling 29,000 shares of common stock and 700 shares of preferred stock after attending that same Feb. 26 meeting. Offer canceled those stock sales on March 7 when he was told that the transactions would be reported to the SEC.
Meanwhile, Arthur Andersen & Co. this week filed a $100-million damage suit against FCA, charging that the financial institution misrepresented its financial condition in 1982 and 1983. FCA dismissed the Andersen company as its outside accountant in 1984 after the SEC forced FCA to report a loss of $107 million in the second quarter instead of a $31.1-million profit.
