Ex-Columbia Thrift Head Subject of Federal Probe

Federal thrift regulators are investigating whether former Columbia Savings & Loan Chief Executive Thomas Spiegel improperly used the thrift’s funds for his personal benefit, with the probe centering on his use of a company jet and thrift-owned condominiums and the purchase of more than 60 firearms for his protection, knowledgeable sources said Monday.

The investigation by the federal Office of Thrift Supervision comes as the Beverly Hills thrift is struggling to avoid being seized by regulators in the wake of massive losses in its junk bond portfolio that have left it insolvent. Spiegel’s conduct could place Columbia among the dozens of other troubled thrifts whose executives were extensively using company funds for personal use.

The investigation, first disclosed publicly by Columbia last month, has focused on Spiegel’s personal use of Columbia-owned condominiums in Palm Springs, Jackson Hole, Wyo., and Deer Valley, Utah. Investigators also are looking at extraordinary personal security measures that at one point had 19 members of Columbia’s 28-person security force assigned to protect Spiegel and his family, sources said.

The most bizarre aspect, however, is the purchase of the guns by Columbia during the mid- to late-1980s. Information obtained by The Times shows that the collection included two semiautomatic Uzis, 13 shotguns and at least 30 pistols, among them eight powerful .357-magnum revolvers. Columbia still owns about 50 of the weapons, more than half of which are being kept by Spiegel in safes at his Beverly Hills home, those familiar with the investigation say.

Spiegel, who resigned as Columbia’s chief executive on Dec. 31, declined comment. Edward G. Harshfield, who replaced Spiegel as chief executive, confirmed the thrust of the investigation, but said he did not want to comment about specifics.

The controversial Spiegel, 44, was the thrift industry’s highest-paid executive when he made $9 million in 1985. At that time, Columbia was among the nation’s most profitable thrifts.

Sources familiar with Spiegel’s position say he argues that the plane and condominiums were used mostly for corporate business and that when he or his family used them personally, Columbia’s expense was recorded as an addition to Spiegel’s income. Those familiar with the investigation, however, dispute that.

Spiegel also is contending that the three condominiums were not set aside exclusively for his use, but that he controlled who could use them. Altogether, Columbia owns four condominiums in Deer Valley and five in Jackson Hole, worth about $400,000 each, and two in Palm Springs, including one worth about $1 million.

In addition, Spiegel is said to deny that he had extensive personal security protection. He contends that the guns, including the Uzis, were used for skeet shooting and other sporting purposes during Columbia-sponsored retreats at the condominiums in Wyoming and Utah.

Columbia’s expense records, according to sources, were first uncovered through an internal investigation started late last year at the request of two senior executives who worked with Spiegel. The records also are being uncovered through a so-called “407” investigation conducted by the Office of Thrift Supervision, the main regulatory agency for savings and loans.

A 407 investigation is used by regulators to probe spending abuses and potential squandering of corporate assets. Although expenses of senior executives in general are being reviewed, sources said, nearly all of the investigation involves looking at Spiegel’s spending.

Spiegel left Columbia as chief executive amid big losses caused mostly by a deterioration in its huge portfolio of risky junk bonds. Columbia has since seen all of its capital--the financial cushion used to protect against losses--wiped out by additional junk-bond losses. In the year ended Dec. 31, Columbia lost $591 million.

Junk bonds are issued by companies with low credit ratings that pay a high interest rate in return for the added risk. Columbia was the largest buyer of junk bonds among S&Ls;, developing a close relationship with Michael Milken, the former Drexel Burnham Lambert financier who pleaded guilty in April to six felony counts of securities violations. Columbia, which must sell its $3-billion portfolio by 1994 according to new federal rules enacted last year, is seeking to sell them now.

Investigators are focusing on the use by Spiegel of Columbia’s Gulfstream IV, widely considered the Rolls-Royce of corporate jets. They are looking into whether Spiegel used the plane, said to have had a butler on board, to travel on weekends from Van Nuys Airport to Palm Springs about 100 miles away.

Separately, investigators found, Spiegel flew by commercial airline to London, then sent for the Gulfstream IV to fly him to Switzerland. The trip, investigators found, cost Columbia about $250,000.

Those familiar with Spiegel say he does not deny the accounts. He contends, however, that the trips to Palm Springs were needed to check on a Columbia country club and condominium project in nearby Indian Wells. He also contends that the jet he sent to England was packed with boxes of annual reports and slides he planned to use for a presentation to European investors.

Columbia once owned the Gulfstream IV with a partnership that included Milken, but sold its interest to the Milken group late last year.

Office of Thrift Supervision officials began their investigation last fall after learning of Columbia’s internal probe, and stepped up the investigation six weeks ago.

The Columbia internal probe was initiated by Kenneth R. Heitz, Columbia’s main lawyer, and James A. D’Aquila, who left as Columbia’s chief financial officer in January.

Heitz and D’Aquila, sources said, inherited responsibility for approving Spiegel’s expenses from Lawrence K. Fish, who resigned as president and chief operating officer of Columbia last August. After seeing the expenses in detail, Heitz and D’Aquila hired the Los Angeles law firm of Irell & Manella, where Heitz worked before joining Columbia, to conduct a review.

The review was launched with Spiegel’s consent about the time a shareholder lawsuit was filed against the thrift, alleging squandering of assets.

Spiegel’s remaining ties to Columbia were cut last month amid concerns that regulators might scrap any potential sale of its junk bonds if he was still connected to the S&L.; The severing of those ties is said to have been prompted in part by the regulatory investigation.

Spiegel and his family remain Columbia’s largest shareholders, owning about two-thirds of the common stock. As Columbia’s losses have grown, the stock has plunged to the point where it is now virtually worthless. The thrift’s annual shareholders meeting is scheduled for today in Beverly Hills, and industry executives expect a raucous meeting.

The U.S. attorney’s office in New York and the Securities and Exchange Commission are probing ties between Columbia and Milken. Sources said seven Columbia executives have been granted immunity from prosecution in exchange for their cooperation.