Bad Turns to Worse in Banking Horror Story

The story sounds like every banker’s bad dream: A dishonest employee embezzles more than $300,000 from a trust account of a handicapped child, then the bank accuses the child’s mother of taking the money.

This was no dream. It happened at Gibraltar Savings in a case involving a depositor named Rebecca Feiring Levinson, who now lives in Marin County. It has been one of Gibraltar Savings’ many headaches in recent years.

According to interviews and court records, here is what occurred:

Nearly 17 years ago, infant Sara F. Feiring was disfigured in a fire in North Hollywood that led to the loss of an arm and a leg. A personal injury suit filed in connection with the blaze eventually led to a court settlement in 1975, in which the child was awarded $149,507.

The money was deposited in a trust account at Gibraltar’s flagship office in Beverly Hills at an interest rate of 7 3/4% for six years.

Twelve years later, Rebecca Feiring Levinson, Sara’s mother, went to Gibraltar Savings’ main branch in Beverly Hills to straighten out longstanding accounting problems that she had been having with the money.

After a long wait, branch manager Robert Anthony told Levinson that the money had been withdrawn three years earlier and deposited in an account at American Savings.

Levinson left the branch in tears after, she said, Anthony told her loudly that “she had stolen her child’s money.” Anthony denied the charge.

Changed Key Records

Anthony was correct about one thing: The money had been withdrawn three years earlier, but not by Levinson. It was taken by Thomas Felch, who was then operations manager of the Beverly Hills branch office.

Felch embezzled the money and covered his tracks by destroying or changing key records, court documents filed by Gibraltar Savings show. He used the money to buy a home.

After Gibraltar Savings discovered the theft, Felch was arrested by Beverly Hills police and ultimately pleaded guilty to charges of embezzlement. He received a four-year prison term.

Meanwhile, Levinson was presented with check of $360,573.90, reflecting the amount that Gibraltar Savings thought it owed her.

The story does not end there.

A dispute then arose over the interest paid on the account. Levinson said Gibraltar Savings had mismanaged the money, paying her a rate of only 5% to 5 1/2% from 1981 to 1987. The money would have earned another $90,000 at market interest rates.

When the bank disagreed, Levinson sued, accusing the thrift of abusing her and depriving her child of much-needed funds. The suit was filed in Contra Costa County by attorney William D. McCann.

“Imagine,” the suit says, “a woman who feels tortured by the nightmare of her child’s condition, a child who was almost destroyed in a fire in 1972, only to be accused of having stolen the child’s nest egg, the only financial security the child could count on to ensure any future whatsoever. Imagine how Mrs. Levinson must have felt as she fled the branch in tears.”

Depositor Blamed

Gibraltar Savings argued that it acted properly and promptly to solve the problem. Felch “was convicted in large part because Gibraltar aggressively pursued the case,” Martin C. Washton, an attorney for the company, said in a telephone interview.

Further, the thrift argued in court that the confusion over interest rates was, in fact, Levinson’s fault. Levinson had failed to renew the trust account at market rates back in 1981, the financial institution said.

The dispute ended last month after Gibraltar Savings settled the complaint for an undisclosed, but large sum. A previous offer to settle the case for $500,000 was turned down by McCann, Gibraltar Savings said in a court filing.

The settlement is believed to be at least one reason why Gibraltar Financial, the parent company, set aside a reserve of $4 million last year for pending litigation. According to McCann, the money was paid shortly before Gibraltar Savings was placed into conservatorship on March 31.

“This has been a horror story,” McCann said.