Regulators Blame Columbia S&L; Loss on Lavish Building
Federal regulators on Thursday alleged that former Columbia Savings & Loan Chief Executive Thomas Spiegel caused the thrift to lose $29.2 million by building a lavish $54.7-million headquarters in Beverly Hills that was to have featured anti-terrorist bomb shelters in bathrooms, stainless steel floors and a multilevel gymnasium.
The allegations were added to earlier civil charges filed two months ago by the federal Office of Thrift Supervision against Spiegel, who headed the Beverly Hills-based thrift until Dec. 31. In those earlier charges, the OTS said Spiegel squandered $19 million of the thrift’s money on such items as corporate jets, condominiums, submachine guns and loans to friends.
The OTS had been seeking to force Spiegel to pay Columbia $19 million in restitution and fine him an additional $5 million. What is unclear is whether the OTS is seeking the entire $29.2-million loss on the building as additional restitution.
Dennis Perluss, a lawyer for Spiegel, said the new allegations are vague on that point. Tom Mason, an OTS spokesman, said that the agency is “seeking a substantial amount of the $29.2-million loss. The numbers will firm up as we go along.”
Perluss refused to comment on the OTS allegations. He said he and Spiegel’s other attorneys plan to prove that the charges are without merit.
Columbia is now insolvent, largely because of losses in its portfolio of risky junk bonds. It has agreed to sell the bonds for $3 billion to a Canadian-led partnership, although the sale must be approved by regulators and could be scrapped by the prospective buyer should fighting break out in the Persian Gulf.
Details about the bomb shelters and other extravagances at the still-unoccupied Wilshire Boulevard headquarters building were first reported by the Los Angeles Times in July. The building was originally projected to cost $17 million, less than one-third what it actually cost, and has a market value of $24 million, according to the OTS. Columbia has put the 80,000-square-foot building up for sale.
In its allegations, the OTS blames Spiegel for the losses by personally ordering design changes, among them the “survival chamber” bathrooms with bulletproof glass. Sources have said that Spiegel wanted them in the building as protection against possible terrorist attacks. The headquarters also was to feature compartments storing independent air and food supplies, stainless steel floors and leather wall coverings.
The OTS alleges that Spiegel never received approval from directors for the building and never informed them of the cost overruns. Columbia’s new management scrapped most of those features before they were completed to make the building more marketable, even though materials to build them were already bought. But some features, such as the building’s limestone exterior, could not be eliminated because it was too late.
The new allegations did not include some other areas of Spiegel’s spending that investigators have reviewed, such as his extensive personal security detail and the use by Spiegel and his family of Columbia’s Hyatt Newporter resort in Newport Beach.
In a separate development, OTS Director Timothy Ryan decided that administrative proceedings against Spiegel and former Lincoln Savings & Loan operator Charles H. Keating Jr. would be made public. Both men are expected to face hearings before administrative law judges later this year. The regulatory agency is seeking $40.9 million in restitution from Keating, former chairman of the Irvine-based thrift’s parent, American Continental Corp., and five other American Continental officers.
