$31 Million Sought From CenTrust’s Ex-Chief : S&Ls;: Regulators act to recover funds they say David Paul misused at the failed Miami thrift. They denounce his ‘insatiable vanity and greed.’
Federal officials on Monday denounced the “insatiable vanity and greed” of former CenTrust Bank Chairman David L. Paul, whose executive bathroom at the Miami thrift had gold-plated sinks and pipes, and began action to force him to repay nearly $31 million to the failed institution.
“The American taxpayers have every right to be outraged,” Timothy Ryan, director of the Office of Thrift Supervision, said at a news conference.
The OTS action is the third in a series of high-profile, big-money complaints by the agency in the aftermath of the insolvency of hundreds of S&Ls.;
The OTS moved earlier this year against Charles H. Keating Jr., the ex-chairman of the former parent of failed Lincoln Savings of Irvine, and Thomas Spiegel, former chief executive of troubled Beverly Hills-based Columbia Savings & Loan. The OTS wants Keating to reimburse Lincoln $40.9 million and Spiegel to repay Columbia $23 million.
In Monday’s action, the OTS said it would serve Paul--who also was CenTrust’s chief executive--with a cease-and-desist order barring him from selling or shifting any assets worth more than $5,000, and demanding the repayment of $30,879,500 to CenTrust, which is now under government control.
CenTrust, once the nation’s 23rd-largest thrift, failed and was seized by the government in February. The estimated cost to taxpayers of the collapse will be $1.7 billion, making the failure one of the nation’s costliest.
The requested restitution includes:
* $15 million in a special legal defense fund organized with CenTrust money for Paul and other directors. The OTS calls it a “slush fund . . . comprised of CenTrust’s most marketable securities.”
* $4.9 million in a pension fund for Paul moved from the United States to a British bank. The money is being managed by Edward D. G. Davies, an important British financier and former CenTrust director.
* $4 million for the government’s losses on the sale of CenTrust’s $29-million collection of Old Master art, including “Portrait of a Man as the God Mars” by Reubens. The picture, which cost $13.2 million, graced a wall in Paul’s home until regulators complained. Then he moved it to the CenTrust Building in Miami.
* $393,000 in pay raises and bonuses in CenTrust’s last and worst year, when the thrift lost $209 million.
* $100,000 to cover the government’s loss on the sale of the yacht “Bodacious,” which cost CenTrust $233,000.
* $35,000 for 24-karat gold leaf ceilings for Paul’s private office and conference room in CenTrust headquarters.
The marble staircase leading to Paul’s office and the gold-plated sinks, faucets and toilet pipes in his private bathroom were extravagant outlays illustrating “Paul’s insatiable vanity and greed, paid for by an (S&L;) insured by the federal government,” said Faith Hochberg, senior deputy counsel at the OTS.
“David Paul’s extravagant lifestyle, in which he enriched himself at the ultimate expense of depositors and taxpayers, exceeds virtually anything this agency has encountered before,” Hochberg said.
The OTS filing was a surprise, according to Paul’s attorney, Aubrey Harwell of Nashville.
“I haven’t been served with this $30-million demand,” Harwell said Monday. “I didn’t know anything until the media called me. I am a bit surprised they chose to go to the press before communicating with me and Mr. Paul.”
OTS officials said Paul has until Nov. 1 to pay the $30 million or post a bond. If he ignores the administrative complaint, regulators said, they will go into federal court to force him to obey the order. If Paul contends that he cannot pay the money, he must file sworn financial statements, the regulators said.
Officials are uncertain of Paul’s whereabouts. There are rumors that he has left the country.
“I can’t tell you where he is,” the OTS’ Hochberg said. “We believe he still has a residence in Miami. He has been seen many times recently.”
The order can be officially served by being sent to Paul’s Miami home and to his lawyer, according to Harris Weinstein, the OTS chief counsel.
The OTS complaint accused Paul of “reckless disregard for the law and regulations” and engaging in unsafe and unsound financial practices. OTS officials also are investigating reports that Paul sent millions of dollars overseas for personal speculation in stocks and commodities.
OTS actions against Paul, Keating and Spiegel demonstrate that “the days of high living at taxpayer expense have ended,” Weinstein said. The agency hopes to “regain every cent possible” from those responsible for the S&L; “debacle,” he said.
After the failure of CenTrust, Beverly Hills-based Great Western Financial Corp. purchased its deposits, branch operations and some assets. CenTrust had $8.2 billion in assets.
