U.S. Seeking $23 Million From Ex-S&L; Chief Spiegel
Federal regulators Thursday charged Thomas Spiegel, former chief executive of Columbia Savings & Loan, with improperly diverting $18 million of the thrift’s funds and moved to force him to repay the full amount and pay a $5 million fine as well.
The case, the largest civil complaint ever brought against an individual by S&L; regulators, charged that Spiegel misused the money to pay himself excessive bonuses, buy tickets to rock concerts, purchase luxury planes in a partnership with junk bond king Michael Milken and acquire condominiums in Palm Springs, Calif., Utah and Wyoming.
Spiegel also spent the S&L;’s money to buy a collection of more than 55 guns and to pay for lavish family vacations, the regulators alleged. On one trip, he was said to have handed out $1,600 in tips.
The Office of Thrift Supervision said that it had issued a temporary order requiring Spiegel to put the money in escrow by noon today, a deadline that he apparently has agreed to meet. His case will then be heard by an administrative law judge.
The Office of Thrift Supervision said that it was seeking to impose a $5-million fine on Spiegel for “recklessly and knowingly” causing losses to his S&L.; The $23 million in claims and fines constitutes the biggest civil complaint ever brought against an individual by the S&L; regulators.
“This is a landmark action by OTS in more than sheer magnitude,” Timothy Ryan, the agency’s director, said. “It exemplifies just how seriously we intend to pursue violations of fiduciary responsibility to protect the taxpayer.”
Spiegel, for his part, expressed outrage Thursday at the charges against him, accusing the government agency of “trial by press release.”
He said that the Office of Thrift Supervision had refused to meet with his lawyers or to give him a chance to respond. “OTS and its predecessors have been abysmal failures, and now--in panic and for purely political reasons--OTS is seeking scapegoats to divert public attention from its gross incompetence,” he charged.
A federal administrative law judge will conduct a hearing later this year on the charges facing Spiegel. The case could be appealed to the federal courts.
Ryan told a press conference Thursday that the Office of Thrift Supervision is “aggressively” pursuing its investigations of the links involving S&Ls; and Drexel Burnham Lambert Inc., the bankrupt brokerage firm, and Milken, the Drexel executive who pioneered the widespread use of junk bonds.
At least three S&Ls;, including Columbia, are included in the government’s investigation.
Both Drexel and Milken have pleaded guilty to securities law violations and have set aside funds totaling $750 million for potential payments to the government and private investors. Those cases were brought by the Securities and Exchange Commission.
No charges have been filed against Milken and Drexel by the regulators of banks and thrifts, but Ryan emphasized Thursday that the officials who oversee banks and S&Ls; are building cases against Milken.
In the case filed against Spiegel, the Office of Thrift Supervision said that he had joined Milken in a partnership to buy and lease aircraft and build a luxury hangar. The partnership bought a British Hawker jet in 1985 for $5 million and two Gulfstream jets in 1986 for $30 million.
Columbia’s board was never fully informed about the partnership, and Spiegel and Milken used the aircraft solely for their personal benefit, according to the Office of Thrift Supervision. Columbia suffered losses of $6.4 million on the partnership.
Senior Office of Thrift Supervision enforcement lawyer Joan Nichols said that Spiegel had Columbia spend $1.1 million to buy four condominiums--two in Jackson Hole, Wyo., one in Palm Springs, and one in Deer Valley, Utah--that were “decorated lavishly” at the S&L;’s expense. She said that three of the homes were used exclusively by Spiegel and that one of the Jackson Hole condos was set aside for Milken.
Spiegel arranged for $28 million in Columbia loans at below market interest rates for Howard Schneider, an automobile dealer operating Gregg Motors and Santa Barbara Star, another dealership, according to Nichols. While the loans were being negotiated, Schneider gave Spiegel the use of a Mercedes-Benz 560 SEL, a Bentley and other luxury cars, she said.
Columbia lost $5.7 million on the loans to Schneider.
Spiegel received a $2.8-million bonus from Columbia in 1989 for his work in 1988, “when the performance of Columbia did not warrant a bonus,” Nichols said. When the regulators said that the bonus was unjustified, Spiegel returned $600,000 to Columbia. The regulators now want him to repay Columbia $2.4 million, including interest.
Nichols said that Spiegel spent $463,000 of Columbia funds for personal purposes, including $1,700 for silverware, $5,000 for cashmere clothes and $2,000 for two quilts. He also spent $55,000 for guns and ammunition, amassing a collection that included submachine guns, automatic pistols and revolvers, she alleged. Spiegel and his wife were said to have made more than four trips to Europe, with Columbia paying the bills.
During the press conference Thursday, Ryan said that Columbia’s new management has “cooperated fully” with the investigation. The agency is seeking to ban Spiegel from the S&L; business permanently.
“We will actively and aggressively pursue all of the charges against Mr. Spiegel, do our utmost to recover every dollar that is due this institution, and seek to collect the civil money penalty as well,” Harris Weinstein, the Office of Thrift Supervision’s general counsel, said. “I look forward to pursuing the efforts to remove him from the industry and prohibit him from ever again taking a role in it,” he said.
Spiegel resigned as Columbia’s chief executive on Dec. 31. The S&L; lost $591 million during the year, suffering from a sharp drop in the value of its $3-billion portfolio of junk bonds. Columbia was the biggest S&L; buyer of junk bonds, as Spiegel worked closely with Milken and Drexel, the nation’s biggest seller of the high-risk, high-yield securities.
WHERE REGULATORS SAY $18 MILLION WENT Amount: $6.4 million Alleged use of the money: Columbia’s losses on alleged Spiegel aircraft partnership with junk bond king Michael Milken Amount: 5.7 million Alleged use of the money: Columbia’s loss on loans to auto dealer Howard Schneider. Spiegel allegedly received free use of Mercedes-Benz and Bentley cars Amount: 2.8 million Alleged use of the money: “Excessive” bonus that Spiegel allegedly drew even though Columbia was losing money Amount: 2.4 million Alleged use of the money: Allegedly unauthorized payments to Columbia Savings Charitable Foundation, which invested in junk bonds Amount: 1.1 million Alleged use of the money: Columbia purchase of condominiums allegedly for use by Spiegel and Milken Amount: 463,000 Alleged use of the money: Columbia funds allegedly spent by Spiegel on gun collection, rock concert tickets, wines and vacations Total to be repaid to Columbia: $18 million Civil penalties sought by United States: $5 million Source: U.S. Office of Thrift Supervision
