Marvin Warner, the owner of a Cincinnati savings and loan firm that collapsed in 1985, sparking a statewide financial crisis in Ohio, was acquitted Friday of all federal criminal charges stemming from the thrift's failure.
Warner, 68, a former U.S. ambassador to Switzerland, was found innocent on all 18 charges related to financial dealings between his thrift--Home State Savings Bank of Cincinnati--and ESM Government Securities, a Florida securities firm. ESM's eventual collapse brought down Home State, which had invested heavily through ESM.
Warner's trial, which was held in U.S. District Court in Ann Arbor, Mich., lasted seven weeks. It had been moved to Michigan because of intensive pretrial publicity in Ohio.
The failure of Home State, which was not covered by federal deposit insurance, wiped out a private insurance fund for 71 Ohio thrifts, in turn prompting a run on the rest of the state's privately insured institutions in March, 1985.
To quell the panic, which was centered in the Cincinnati area, Ohio Gov. Richard F. Celeste ordered all state-chartered thrifts closed until they could obtain federal deposit insurance.
The financial crisis quickly turned into a major political crisis for Celeste. The governor was widely criticized for not requiring closer state scrutiny of the state-chartered thrifts and for his close political ties to Warner. Still, Celeste won reelection by a landslide in 1986.
Government attorneys argued during Warner's trial in Ann Arbor that he, along with former Home State President Burton Bongard, conspired to provide ESM with Home State assets to conceal ESM's losses. In return, the indictment charged, ESM gave Home State--and Warner and Bongard personally--favorable interest rates on loans and guaranteed profits on securities trades.
Bongard pleaded guilty to four counts in the case and testified for the government in Warner's trial. Bongard has not yet been sentenced. Ron Ewton, ESM's chairman, has been convicted and sentenced to 15 years in prison in a related case but is seeking a reduction of his prison term.
In addition, Bongard, Warner and David Schiebel, another former Home State executive, were all convicted of state charges related to the case in Ohio in March. All three have appealed the state convictions.
R. Stan Mortenson, Warner's attorney, said Friday that he was "elated" but not surprised at the verdict in the federal trial. "I didn't believe that the government had made a case, and the jury, after deliberating only two hours and 45 minutes, agreed that Marvin was not involved in a conspiracy," Mortenson said. The government's attorneys prosecuting the case could not be reached for comment.
Immediately following the Home State scandal, the Ohio Legislature appropriated $129 million to back up the deposits of Home State's 500,000 depositors. The state has recovered about one-third of those funds and has filed lawsuits seeking a total of $260 million from those tied to Home State's collapse. According to Debra Phillips, Celeste's press secretary, Ohio will continue to press the suits, despite Warner's acquittal.
Today, all of the state-chartered savings and loans in Ohio have either obtained federal charters and federal deposit insurance, or have been merged into larger federally insured institutions.