Complaint Prompts Probe of Pay Practices at Glendale Federal Savings

The U.S. Department of Labor is investigating allegations that Glendale Federal Savings & Loan, in a report to the government, deliberately understated the number of women and minority employees who, compared to white males, were underpaid.

The investigation, begun this month by the department’s Los Angeles Office of Federal Contract Compliance Programs, was prompted by a complaint from the company’s former affirmative-action officer.

Interviews and government memoranda show that the inquiry, expected to take at least two months, is the culmination of a two-year dispute between the company and the government over hiring and promotion practices at the savings and loan’s 217 branches.

Glendale Federal officials deny the charges and say they have never knowingly provided false information to any regulatory agency. They confirmed that the savings and loan is under investigation, but would not discuss the subject in detail.

According to federal officials, this will be an unusually detailed investigation. Five investigators from the Van Nuys office of the compliance agency are interviewing employees at Glendale Federal and examining personnel data.

The Civil Rights Act of 1964 requires federal contractors to prepare and follow plans for the hiring and promotion of women and members of minority groups. Savings and loans, because they dispense savings bonds and are involved in the sale of U.S. Treasury certificates, are considered federal contractors.

Investigators review corporate personnel and hiring profiles every three years but, because of staffing limitations, usually rely on data that corporations supply. In a letter that his lawyer sent to federal investigators, Jack Clayter, the former Glendale Federal affirmative-action officer, claimed that officials at the savings and loan “passed its audit by submitting false and misleading statistics.”

Clayter’s job was to mediate among corporate officials, federal affirmative-action investigators and minority employees. Glendale Federal officials asked him in July, 1986, to prepare a report to determine if minority and women workers were underpaid compared with white men in similar positions.

Clayter based his analysis on four criteria: performance, length of time in the current jobs, education and experience. His analysis identified 127 employees as deserving raises. It estimated the additional salary cost at $289,971 during the first year.

According to memoranda obtained by The Times, Glendale Federal officials were unhappy with those results and reassigned the task to another employee.

That employee revised Clayter’s report after adding two criteria. The new report cut the number of underpaid women and minority employees to 83 and estimated the first-year salary cost at $50,472.

Clayter said he was asked to submit the new report and refused. It was eventually given to the government by another Glendale Federal official.

The central issue in the investigation appears to be whether the added criteria are considered fair measures of an employee’s worth. The two new criteria are: “an analysis of peer relationships in the same job,” a phrase that company officials declined to explain, and the employees’ length of service with Glendale Federal.

Clayter contends that the second new criterion favors white men, who have generally been in the middle and upper levels of the work force longer than women and members of minority groups.

Federal officials said they have not yet determined whether those criteria were discriminatory. A federal manual used by companies gives detailed suggestions on how to prepare reports requested by the government, but the specific criteria used to justify employee salaries for review vary from company to company, they said.

Clayter was fired as Glendale Federal’s affirmative-action officer in the fall of 1987. He took documentation with him that he later turned over to civil rights lawyers and state and federal investigators. Clayter has since filed a discrimination complaint against his former employer. He said he intends to file a lawsuit against the company, the nation’s fifth-largest savings-and-loan institution.

Other employees filed two discrimination complaints in October with the state Department of Fair Employment and Housing and the federal Equal Employment Opportunity Commission. Officials say those agencies are investigating.

The dispute between the Labor Department and the company dates to 1986, when federal investigators looked into charges by employees of discrimination at the company. They found what they considered a disproportionate number of white men in managerial positions. What followed was a series of testy exchanges between investigators and Glendale Federal, with federal investigators repeatedly finding information supplied by the corporation inadequate.

A May, 1986, letter from federal investigators to Glendale Federal board chairman Ray Edwards noted that, of 2,168 promotions and hires within the company in fiscal 1986, only 5.2% involved blacks and 8.7% Hispanics. Less than a month later, an investigator met with Glendale Federal President Keith Russell and other company officials. At the meeting, according to a memorandum summarizing the dispute, Russell pledged his commitment to increasing the minority work force.

In July, Clayter was asked to prepare the report now under dispute. The revised report was sent to federal investigators that month.

The company will not say how many employees actually received the raises called for in the report. But by October, 1986, federal officials still were not satisfied with Glendale Federal’s efforts. Investigator Jim Davis, who has since died, and Robert Cole, then director of the Los Angeles office of the compliance agency, met with top management at the savings and loan to discuss the dispute.

Cole said the meeting marked his first visit to a facility under investigation.

“The only way I would go there is if it would be a major problem,” Cole, who is now retired, said recently. “I had some grave concerns about the fact that they had not made progress.”

Documents indicate that the meeting did not go well. A memorandum by the company’s manager of human resources, Dana Bresnahan, characterized the federal investigators as irrational and biased. The memorandum said: “There was more hostility expressed, by both Davis and Cole, than I, at least, had anticipated.”

He said the federal officers had escalated the talks “beyond rational discussion.”

“They, as blacks, are clearly mad at us, possibly because we carry the name of Glendale . . . which has for years had an anti-black reputation in the black community of Southern California,” the memorandum said. “Unfortunately, the numbers, as we have had to report them, do not make a case that this reverse-prejudice is undeserved.”

Glendale Federal officials assured Davis and Cole that they were committed to significant progress in minority hiring, and the investigators promised not to pursue action if the savings and loan made that progress, Bresnahan wrote.

Glendale Federal spokesmen say they have hired and promoted more minorities since, but they refuse to say how many. They said there is no connection between those efforts and any investigation by an outside agency.

Clayter was suspended from his job in October, 1987, after he took his allegations to the private Center for Law in the Public Interest in Los Angeles. A memorandum to Clayter on his suspension said: “The essence of your job is to resolve personnel, EEO, affirmative action and discrimination disputes internally, and to keep the company out of trouble.”

A month later, Clayter was fired for refusing to accept a transfer to a position outside affirmative action, at a lower salary.