Former Columbia Savings & Loan Chief Executive Thomas Spiegel is abruptly ending his involvement in trying to help the ailing Beverly Hills thrift sell its nearly $3 billion in junk bonds, sources familiar with Spiegel's plans said Wednesday.
Spiegel's primary concern is believed to be that regulatory approval of any deal Columbia makes to sell the bonds might be jeopardized if he remains involved with the thrift in any way.
The maverick Spiegel has never been popular with regulators. His decision, sources said, was strongly influenced by the disclosure this month that Columbia is being investigated by the federal Office of Thrift Supervision.
Although Spiegel and members of his family still control Columbia through their holdings of the thrift's stock, Spiegel's move effectively severs his remaining ties as an executive to the institution he built into one of the nation's most controversial savings and loans through investments in risky, high-yield junk bonds. Junk bonds are issued by companies with relatively poor credit ratings, and pay investors a higher rate of interest to compensate for the risk.
Since resigning as chief executive on Dec. 31, Spiegel has been working for Columbia as a consultant to help it sell the junk bonds as required by the thrift reform bill signed in August.
Spiegel this week is sending letters on his decision to leave Columbia to eight groups that are finalists in bidding to buy the junk bonds, worth about $2.9 billion as of March 31. He also has advised thrift regulators of his decision, and has received their blessing.
Spiegel, reached at his Beverly Hills office, refused to comment on his plans. A Columbia spokesman also declined comment.
Sources said Spiegel also believes his role in helping sell the junk bonds is largely over because prospective buyers have concluded their "due diligence" in examining the portfolio. As previously reported, the eight interested groups include such names as Bankers Trust, General Electrical Capital Corp. and the Pritzker family of Chicago.
Spiegel, 44, resigned amid growing losses caused by a plunge in the value of the junk bonds. Columbia lost $591.1 million last year and further red ink this year has wiped out its capital, or the cushion it must maintain against losses, putting it in danger of being seized by regulators.
Selling the bonds is important to Columbia because it is the only way it might survive, although few thrift experts give it a chance even with a sale because so much damage has already been done. Regulators are said to want to make a sale to prevent having to take over the portfolio, and because it will minimize any cost to taxpayers if they have to take over Columbia.
Sources said Spiegel is especially anxious that a sale go through. Although he has never cared much for his public image, Spiegel has been telling friends and associates that he does not want to go down in history--along with such people as former Lincoln Savings & Loan chief Charles H. Keating Jr. and former CenTrust Bank head David Paul--as having cost taxpayers a bundle.
As a consultant, Spiegel was to make $500,000 a year, but later accepted a $1 annual salary after regulators objected. Columbia did continue to provide him more than $17,000 a month in office and administrative expenses.
Spiegel's plans are unknown. His resignation does not affect the position of his father, 83-year-old Abraham Spiegel, who is Columbia's chairman.