FSLIC Sues 10 in Westwood Savings Insolvency Case
The Federal Savings and Loan Insurance Corp. filed a $127-million suit Friday against 10 former officials or business associates of Westwood Savings & Loan, charging them with improper practices leading to Westwood’s insolvency.
The civil suit is the first action by the FSLIC to recover losses that it might suffer as a result of having taken control of the once-fast-growing savings and loan firm in March, 1986, FSLIC spokeswoman Martha Gravlee said.
“It’s a fairly large case,” Gravlee said, noting that the damages sought are larger than in many similar FSLIC suits. The FSLIC, which itself is technically insolvent due to burgeoning failures of savings and loan firms in recent years, will not know its precise losses from the Westwood takeover for some time, she said.
Westwood, which was formed in 1978, grew quickly in the early 1980s to become one of the state’s 50 largest S&Ls.; But it later became a victim of that rapid growth, losing $11 million in 1985 due to a large portfolio of real estate loans that had gone sour. The Los Angeles-based S&L; remains open, with the FSLIC as conservator.
The suit, filed in U.S. District Court in Los Angeles, includes as defendants Edward M. Israel and Albert Collins, who together acquired Westwood in October, 1981. Israel, a Los Angeles developer, was chairman of Westwood while Collins, a local builder, was vice chairman. Also named as a defendant is Ronald Shenkman, who resigned as Westwood chief executive in August, 1985.
Other defendants include Robert Margolis, a former Westwood president and now president and chief executive of Western Empire Savings & Loan in Irvine; Alvin F. Howard, a former Westwood director; Richard S. Herschenfeld, a former chief financial officer and secretary; Mark A. Bishop, a former vice president, and John Auletta, former chief loan officer.
Also named were Michael S. Moers, chairman and chief executive of Brookside Savings & Loan, based in Pasadena, and Linda Collins, daughter of Albert Collins. Moers and Linda Collins were not Westwood officials but participated in ventures that affected Westwood.
Israel, Albert Collins, Howard, Herschenfeld, Shenkman, Auletta, Bishop and Margolis were charged with breach of fiduciary duty. Auletta, Israel, Albert Collins, Linda Collins, Moers and Bishop were charged with fraud. Israel, Linda Collins, Albert Collins and Moers were charged with conspiracy.
The real estate loans and transactions in question were conducted with inadequate analysis and incomplete documentation, the suit says. Some of the transactions also involved properties owned by one or more of the company officials or persons affiliated with them, the suit charges. Some transactions also involved the concealment from regulators of material terms adverse to Westwood, the suit said.
None of the defendants could be reached for comment.
