Banks and S&LS; : Government Triples Restitution Sought in Lincoln Failure
The Office of Thrift Supervision said Wednesday that it has more than tripled, to $130.9 million, the restitution it is seeking from Charles H. Keating Jr. and six associates linked to the failure of Irvine-based Lincoln Savings & Loan.
That makes the Lincoln restitution case the largest the OTS is pursuing.
At the same time, federal regulators said they lowered by $3.2 million, to $21.3 million, the restitution sought from Thomas Spiegel, former chief executive of Columbia Savings & Loan in Beverly Hills.
The two cases are among several major administrative actions that the OTS has filed against owners of failed thrifts who allegedly obtained funds from the institution through fraud or other improper activities.
OTS spokesman William Fulwider said the restitution sought in the Lincoln and Columbia cases were changed several months ago but were only made public recently, partly because the agency’s executive staff did not know that its lawyers had adjusted the numbers.
Lincoln, which was owned by a company controlled by Keating, failed in 1989 after risky real estate and junk bond investments soured. The collapse is expected to cost taxpayers $2.6 billion, making it the costliest S&L; failure to date.
The amount sought in the Lincoln restitution case far exceeds the $30 million OTS is seeking from the former owners of CenTrust Savings in Miami. It also tops the $25 million that the agency is seeking from Newport Beach businessman Michael Parker and two associates for allegedly defrauding Columbia in a leasing scheme.
In August, the agency filed a complaint against Keating seeking $40.9 million in restitution. The filing cited three deals that showed “blatant disregard for the safety and soundness of Lincoln” and caused the S&L; to lose money.
The agency increased the amount sought after amending its complaint to include allegations of an illegal tax-sharing plan between Lincoln and its parent company, American Continental Corp. in Phoenix. Under the plan, Lincoln forwarded more than $90 million to its parent for its share of income taxes, which the government says were not due.
In the case of Columbia’s Spiegel, OTS lawyers learned that some of the assets they had counted as losses were actually sold at a profit, forcing a change in the amount sought.