Federal regulators have sued the former top managers and owners of Butterfield Savings & Loan Assn., claiming that they negligently operated and defrauded the Santa Ana institution.
The suit, filed in U.S. District Court in Los Angeles, seeks a total of more than $40 million from the S&L;'s former chairman, Donald Endresen, and from four other former officers and the former holding company, Butterfield Equities, for allegedly concealing from the S&L;'s board facts about certain loans and investments.
Butterfield was declared insolvent and seized last Aug. 7 by the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corp. The regulators kept the S&L;'s two branch offices open and turned its management over to a team from Downey S&L.; Downey is not involved in the lawsuit.
Reached on Wednesday at the Anaheim office of Butterfield Equities, which was not taken over by regulators, Endresen was reluctant to comment on any specific allegations, saying that he had not yet been served with the complaint and was not aware of its contents.
“Whatever the charges are, they are patently absurd,” he said. “There is absolutely no truth to any of it.”
In the suit, the bank board and the FSLIC contend that Butterfield Equities and Endresen, his brother, William, and his father, David, caused the S&L; to invest $15 million in a shared promissory note secured by a high-rise office building.
The suit adds that they failed to tell the S&L;'s board, which had to approve the deal, that they had sold a key right that would have protected Butterfield against a loss. The investment later soured and Butterfield lost money.
The suit further alleges that the Endresens and Butterfield Equities conspired with a number of brokers to boost commissions and property prices in the S&L;'s $85-million purchase of property, primarily in the Pacific Northwest. The suit claims that the S&L; overpaid by about $20 million for the properties.
The suit also names former officers and directors Chris R. Reinhardt and Nelson H. Coleman.
In the two years before the regulators’ takeover, Butterfield lost more than $40 million.