FDIC Files a $560-Million Suit Filed in S&L; Fraud Case

Federal bank regulators have filed a $560-million lawsuit against the former owner of Western Savings Assn., contending that he defrauded the failed thrift of at least that much money.

The Federal Deposit Insurance Corp. also accuses Jarrett E. Woods Jr. of spending $7 million of depositors’ money on himself during the thrift’s final months in 1986.

No criminal charges have been filed against Woods.

The lawsuit is one of the largest ever filed by the government against a savings and loan owner. It was filed Friday in Dallas but not released until Tuesday.

The suit accuses Woods and Western Capital, a corporation he controlled, of engaging in fraud and violating contracts. The government alleges that in the four years Woods controlled the thrift, he squandered its deposits on high-risk and fraudulent investments and improper loans.

“The losses suffered by the institution appear to exceed $1 billion, at least $560 million of which was the preventable result of the policies and practices implemented at Western by Jarrett E. Woods Jr. and Western Capital Corp.,” the suit states.

Woods is accused of using thrift money to refinance his home, funneling millions into his children’s trust funds, paying off a personal loan and paying himself an $800,000 bonus and a $41,667 monthly salary.

When federal regulators closed Western in September, 1986, examiners found “deficient or non-existent appraisals, inadequate loan documentation, inaccurate accounting and shoddy record-keeping,” the lawsuit states.

Woods disagreed with the regulators’ contentions. He claimed that the thrift was not insolvent and that he had tried to find solutions to the examiners’ concerns.

Woods could not be reached for comment Wednesday.