Mercury S&L; Lays Off 70, Faces Lawsuit : Thrifts: Insolvent and operating under regulatory restrictions, the savings and loan loses its chief financial officer and is named in a class-action lawsuit.

Beleaguered Mercury Savings & Loan, insolvent and operating under severe regulatory restrictions, said Friday that it is laying off 70 employees, or 10% of its staff, effective immediately.

The Huntington Beach thrift, which has reduced assets 20% in the last year to about $2 billion, said the departures included its chief financial officer, Ronald Hansen, who resigned after seven years in that position.

Mercury Chairman Leonard Shane said the S&L; has not decided yet if Hansen will be replaced. His duties will be temporarily handled by Jack Klein, the S&L;’s chief operating officer.

The layoffs will mostly affect employees in the S&L;’s loan department and headquarters staffs. Federal regulators last month ordered Mercury to halt all new lending and investing.

Mercury also disclosed Friday that a shareholder, S.D. Wechsler of New York, had filed a class-action lawsuit against Mercury’s directors and top executives, including Shane, claiming fraud, deceit, misrepresentation of financial data, breach of fiduciary duties, and violations of state and federal securities laws.

More specifically, the suit claims that Mercury failed to set aside enough reserves for loan losses, “improperly and aggressively” booked millions of dollars of revenue from gains on the sale of loans, and failed to prepare financial statements according to generally accepted accounting principles.

The suit, filed Tuesday in U.S. District Court in Santa Ana, does not specify the amount of damages sought. It was filed on behalf of those who purchased Mercury stock between April 3, 1987, and Jan. 19, 1990.

Shane would not comment on the lawsuit, saying that Mercury executives have not yet had time to review it thoroughly.

Trading in Mercury’s stock has been volatile the last two days. The price jumped 33% in heavy trading to $2 a share at Thursday’s close, and then dropped 37.5% to $1.25 a share on Friday.

Mercury has been looking for a buyer, but Shane said the S&L; knows of no reason for the stock’s high volume and big price swings. He would not discuss whether Wall Street rumors about a possible sale of the firm were related to the stock activity.

In recent years, the stock has traded up to $17 a share, according to the shareholder suit.

Last month, Mercury disclosed that it was insolvent after writing down its assets by $32 million, mainly because of devaluing two loans totaling $60.7 million on which the owners of Marriott hotels in Irvine and Tulsa, Okla., are in default.

Following that disclosure, federal regulators quickly slapped an order on the S&L; curtailing its operations.

Mercury lost $13.8 million in 1988 and $5.4 million in the first nine months last year.