State Seizes S&L; So Foreign Owners Can’t Divert Funds
In a precedent-setting action, state officials seized control of Universal Savings Bank Tuesday to prevent its debt-laden Australian owners from diverting funds overseas.
William Crawford, commissioner of the California Department of Savings and Loan, appointed Chief Deputy Commissioner William Davis to serve as conservator of the Orange-based savings and loan while the state investigates a potential cash diversion.
Crawford said the action, which marked the first time the state has seized control of an apparently healthy S&L;, was based on confidential information provided to the department by employees of the savings and loan. The employees, Crawford said, had expressed concern that Unity Corp. Ltd. of Sydney, Australia, which purchased Universal in December, 1986, had diverted funds or intended to divert funds from the savings bank to help reduce its substantial debt.
Unity, a diversified company with interests in real estate and financial services, recently initiated a major restructuring program to help pay off $325 million in debt incurred in connection with its unsuccessful takeover bid for Humes Ltd., a Melbourne-based building products manufacturer.
Contacted in Sydney, Unity’s group investment manager Dennis Vickery said he was unaware of the state’s action. “I’m surprised by the allegations and believe they are totally unfounded,” Vickery said. “It’s preposterous.”
Universal, with $308 million in assets and $12.5 million in net worth, is the only California-based savings and loan owned by foreign interests.
“We feel (Universal) is solvent, but we don’t know that for sure,” Crawford said. “We’re concerned about the viability of the parent company. The parent company needs money, and we just want to make sure that this institution doesn’t feed the kitty.”
Davis, the newly appointed conservator, said the state is focusing on “certain transactions that were in progress and had not been completed.” He declined to divulge details of the transactions, apparently involving Universal and its Australian owners.
“On the basis of the information that was brought to us, we had a great deal of concern that the assets of the institution could indeed be dissipated,” Davis said.
Davis assumed control of Universal’s operations at 8:30 a.m. Tuesday. One of his first actions as conservator was to temporarily relieve Universal Chairman Chris Blaxland of his duties. Blaxland, who was installed as Universal’s chairman by Unity, declined to comment on the takeover.
Davis said Universal President Serge Woodruff “has our confidence” and will remain on the job. No other management changes were made Tuesday, Davis said, although Universal’s board has been relieved of its responsibilities while Universal remains in conservatorship.
The appointment of Davis as conservator was approved Tuesday by the Los Angeles Superior Court, which placed all documents relating to the case under seal.
