All Civil Suits Against Owners of 2 Thrifts Settled : S&L; failures: The actions involved American Diversified Savings Bank and Consolidated Savings Bank. Criminal inquiries are continuing.
Federal regulators have settled all civil lawsuits, including claims of racketeering and fraud, against the former owners and operators of American Diversified Savings Bank and Consolidated Savings Bank, authorities said Monday.
The FBI, however, is continuing separate criminal investigations of the two defunct Orange County thrifts, which failed in 1986.
Consolidated Savings, which was based in Irvine, and American Diversified, which was based in Costa Mesa, were two of seven top priority cases among nearly three dozen bank fraud and embezzlement investigations in Orange and Los Angeles counties, according to federal authorities.
American Diversified still holds the record for the biggest total refund to S&L; depositors. When the S&L; was closed in 1988, thrift regulators paid back $1.14 billion in insured deposits to account holders.
Regulators settled all the civil actions pending with Consolidated Savings owner Robert A. Ferrante and American Diversified owners Ranbir S. Sahni and Lester Day, said John Thomas, a supervising attorney with the Federal Deposit Insurance Corp.
Most of the litigation--in both state and federal courts in Los Angeles and Orange counties--involving other directors and officers of the two institutions also was settled, he said.
Under the terms of the agreements, details of the settlements were not to be disclosed. Thomas said pieces of the litigation have been settled at various times, with most coming in the last month.
In several lawsuits, the first of which were filed in 1986, Sahni was accused of racketeering, fraud, mismanagement, breaches of fiduciary duties and violations of banking laws and regulations. The accusations against him involved various real estate transactions, allegations of illegal kickbacks and allegations of improper bonuses to his president, Lester Day. Sahni, who owns 96% of the defunct American Diversified, denied the charges.
“I want to forget it, put it behind me and go on with my life,” Sahni said on Monday.
Sahni, who is normally talkative, said he could not discuss the settlement. However, he said he hopes to continue working on real estate deals out of a Santa Ana office through his American Development Corp.
In a separate case, Ferrante was accused of racketeering, fraud and breaches of fiduciary duties and flagrant violations of state and federal banking laws and regulations relating to his actions at American Consolidated. The lawsuit, filed in 1986, accused him and others of wrongfully benefiting from a series of transactions.
Ferrante, who previously denied the allegations, could not be reached for comment. But his attorney said the Newport Beach developer was happy with the settlement.
“He’s delighted (that) he’s put the disputes behind him, and he’s delighted he and regulators are focusing on what to do with Consolidated’s major asset,” said his attorney, Brian C. Lysaght of Los Angeles.
That asset, a 157-acre landfill in Carson once used as a hazardous waste dump, was one of the main causes for the thrift’s downfall. Regulators said it was not worth the $9 million Consolidated Savings had loaned on the property. They ordered the thrift to devalue it to $6.2 million, Lysaght said.
Under a court-approved reorganization plan for a Ferrante company in U.S. Bankruptcy Court, the FDIC as receiver for Consolidated Savings stands to get $29 million if the property can be developed into a shopping center-office complex, the attorney said.
Ferrante put together a group of investors who will pay $47 million for the site, Lysaght said. The group already has turned over $3 million to pay for administrative expenses and an environmental study. The bankruptcy court will supervise the plan for four years.
“This will be the most successful receivership in (S&L;) history in the end,” he said. Consolidated should get triple its money back, and all creditors should get repaid in full, he said. Ferrante, as owner of the defunct thrift, may even get some of his equity back.
Right now, though, regulators are estimating that Consolidated Savings will cost U.S. taxpayers about $43 million once its assets are totally liquidated.
American Diversified, on the other hand, will cost taxpayers $798 million after regulators sell all of its assets, according to regulators.
At the thrift, Sahni had set up a complex business involving non-traditional S&L; investments such as real estate syndications, wind-turbine farms and electronic pagers. Regulators said he kept most things in his head, forcing them to hire a legion of lawyers to unravel the organization to determine who owned what and to prepare the lawsuits against Sahni.
The American Diversified litigation became one of the costliest proceedings among thrift failures as the federal government spent an estimated $15 million or more to gather the evidence and to pursue Sahni and Day.
Sahni fought back with lawsuits of his own, charging regulators with having seized control of assets that were his, not the thrift’s. The litigation quickly became a seemingly endless quagmire of charges and countercharges, and some lawyers questioned long ago whether the government could ever win more than it had spent on legal fees.
Sahni and Ferrante were two of four maverick Orange County bankers who vowed in early 1987 to fight thrift regulators over the takeovers of their institutions and over the allegations against them. They charged that they were being made scapegoats in the growing thrift fiasco and that they had done nothing wrong.