$24 Million Sought Over Failure of S&L; : U.S. Sues Kidder Peabody and Calif. Investment Group

Federal regulators said today that they have filed suit to recover $24 million from the Wall Street brokerage firm of Kidder Peabody & Co. and a California-based investment group over activities related to the failure of a savings and loan association.

The civil complaint of the Federal Savings and Loan Insurance Corp., filed in U.S. District Court in Los Angeles, alleges that the insolvency of Seapointe Savings and Loan in Carlsbad, Calif., was the result of the defendants’ violation of laws and regulations governing trading by S&Ls; in securities, futures and commodity options, as well as breaches of fiduciary duty.

Also named in the suit were Strategic Investment Services; Robert Peacock, an account manager at Kidder Peabody; Dirk Rose, president of SIS, and Robert Forrest, a director of SIS.

The complaint charges that, rather than bona fide hedging to protect Seapointe’s assets, the trading conducted by Kidder Peabody and SIS amounted to risky speculation.

In addition, the regulators charged that the defendants knew that Seapointe’s directors were inexperienced in securities, futures and commodity options trading and that SIS made representations to further its own interests without regard to those of Seapointe Savings.