4 Orange County S&Ls; Are Among Suit’s Bondholders : Thrift failures: The institutions are among 44 in whose behalf the FDIC is suing Michael Milken and 27 others.

The $6-billion lawsuit filed Friday against junk bond pioneer Michael Milken by federal bank regulators seeks to recover some of the losses that contributed to the failures of 44 savings and loans nationwide, including four in Orange County.

The Federal Deposit Insurance Corp. filed the suit in U.S. District Court in New York on behalf of the failed institutions, which include Lincoln Savings & Loan in Irvine, FarWest Savings and Charter Savings Bank, both in Newport Beach, and Western Empire Savings & Loan in Yorba Linda.

The Orange County S&Ls; together held about $1.3 billion in junk bonds, nearly 18% of all junk bonds held by California thrifts in mid-1989.

The regulators allege that these and other failed thrifts were bilked out of funds through risky junk-bond trading. The suit accuses Milken and 27 other defendants of illegally manipulating the junk bond market and distorting the value of bonds sold to the thrifts.

The market for those speculative high-yield corporate securities has dropped dramatically in large part because a federal law enacted in August, 1989, mandates that thrifts get rid of their junk bond portfolios within five years.

Thrift regulators have long been suspicious of the junk bond market created by Milken and his aides at the Drexel Burnham Lambert brokerage, which is now bankrupt.

The suit contends that Milken and his cohorts “willfully, deliberately and systematically plundered certain S&Ls.;” The suit charges that they did so by making inflated claims about the value of junk bonds and using “market manipulation, threats, bribes, coercion (and) extortion” to persuade thrifts to buy junk bonds.

Former thrift owners and operators are among the defendants. These include Charles H. Keating Jr., whose company owned Lincoln, and Thomas Spiegel, former chief executive of Columbia Savings & Loan in Beverly Hills. Other defendants include former Drexel Burnham executives.

FarWest was the state’s third-largest holder of junk bonds, behind Imperial Savings & Loan in San Diego and Columbia, the nation’s biggest bond buyer. FarWest, seized only 10 days ago, had increased its holdings to $667 million--or 14% of its assets--by purchasing more than $100 million in junk bonds just before the federal law was adopted.

Lincoln had $565 million in junk bonds, or 15% of its assets, shortly before regulators seized it in April, 1989. It had more than $600 million at one point, but Keating sold a portion in the months before the thrift was seized.

Western Empire was a failing thrift in late 1988 when a New York investment firm bought it without government assistance. The firm won approval for reviving the S&L; with a business plan that relied on junk bond trading. It bought more than $50 million in junk bonds, or about 20% of the S&L;’s assets, before the law was adopted. Its failure a year ago was attributed directly to the falling value of its junk bond portfolio.

Charter Savings had only about $5 million--or less than 2%--of its assets invested in junk bonds. Its collapse last June was attributed, however, to bad real estate loans and investments it picked up when it purchased a failing Los Angeles thrift.