Sahni Says U.S. Can’t Hold Him Liable for S&L; : American Diversified’s Ex-Owner Files Claim
Ranbir S. Sahni, former chairman of a failed Orange County thrift that last month triggered the largest cash pay-out ever made to depositors, has filed a claim alleging that federal regulators lack the authority to pursue $120 million in fraud and other claims against him.
In court documents, Sahni alleges that because shareholders approved all dealings at American Diversified Savings Bank, he cannot be held liable for those dealings in a civil suit by the Federal Savings and Loan Insurance Corp.
The institution’s only shareholders were Sahni, who owned 96% of the savings and loan, and former president Lester Day, who owned the rest.
FSLIC lawyers said Sahni’s claim reflects “stunning audacity.”
“In other words, no matter how much he squandered (the thrift’s) assets, no matter how extraordinary the losses he caused, no matter how much he looted (the thrift), Sahni cannot be called to account,” according to papers filed by federal regulators.
Sahni’s legal maneuver to escape the lawsuit, filed two years ago by the FSLIC and alleging $120 million in losses attributable to Sahni and Day, is scheduled for a hearing next month.
$1.3-Billion Pay-Out
Last month, FSLIC closed American Diversified, which it had operated since February, 1986, and began a record pay-out of $1.3 billion to insured depositors in the insolvent institution.
The legal doctrine cited by Sahni’s lawyers holds that shareholders who consent to a particular management activity should not benefit from a later lawsuit filed by the firm questioning those actions. They contend that the FSLIC lawsuit was filed on behalf of shareholders as well as creditors of the thrift.
FSLIC lawyer Theodore Russell countered that the agency is suing primarily for the benefit of creditors, not shareholders.
“Sahni’s motion seeks to turn a vice into a virtue by the simple act of labeling their purported discussions about defrauding the bank and other wrongdoing as (shareholder) ratification,” Russell said.
Operated for Personal Benefit
Sahni treated the thrift as though it were to be operated solely for his and Day’s personal benefit, the FSLIC lawyer alleged.
In the lawsuit, which is pending in U.S. District Court in Los Angeles, FSLIC has alleged that the thrift sustained losses of $60 million from self-dealing by Sahni and Day, including improper bonus payments, use of thrift funds to buy personal assets and issuance of loans at favorable interest to firms owned by Sahni.
In addition, another $60 million was lost as a result of falsification of bank records allegedly designed to fool bank regulators, including promissory notes, loan documents, real estate appraisals, checks, payment vouchers, accounting records, and real estate purchase agreements, according to the government.
Allegations of Misconduct
Specific instances of misconduct alleged by the FDIC:
- Sahni diverted thrift assets of more than $6 million to pay expenses of American Development Corp. and American Diversified Equity Corp., companies owned and controlled by Sahni and Day.
- The thrift also loaned more than $1.2 million to American Development Corp., in violation of federal regulations prohibiting loans to a borrower affiliated with an officer or director of the bank.
- Day received $568,000 in bonuses at a time when he and Sahni knew the institution was insolvent.
- The bank paid $1 million too much to buy property in Colorado at the same time that Sahni allegedly bought another property from the same seller at the same time for a $1-million reduction.
- Sahni and Day allegedly caused the thrift to pay $1 million in fees to American Development Corp. for work not performed.
Sahni and Day have denied the allegations and filed their own claims against federal regulators, alleging that the thrift’s losses resulted from interference by regulators.
Sahni’s lawyer, Franklin I. Remer, declined comment.
