Regulators Fire First Executive’s Chief Financial Officer : Insurance: Officials claimed he and the firm’s vice president of finance were ‘uncooperative’ with a state investigation.

Insurance regulators fired First Executive Corp.’s chief financial officer Friday, saying he refused to cooperate with the state Insurance Department’s investigation of Executive Life Insurance Co. of California, which was seized by regulators two weeks ago.

William J. Sanders, whose employment contract promised 1991 compensation of at least $500,000, was the partner in charge of First Executive Corp.’s outside audit until last summer, when he accepted this richly paid position at the company. Los Angeles-based First Executive Corp. is the parent of Executive Life of California and Executive Life of New York, which are now both under regulatory control.

First Executive’s vice president of finance, Mark Furlong, who also left the accounting firm of Deloitte & Touche after issuing a clean report on the company’s financial condition last year, was also fired Friday.

“William Sanders and Mark Furlong were uncooperative with our review of Executive Life Insurance, and I removed them from their positions yesterday,” Insurance Commissioner John Garamendi said Friday through a department spokesman.

Regulators would not comment further except to note that a “comprehensive investigation into actions by Executive Life, its officers and employees will continue.”

Sanders denied that he was uncooperative and said he was one of several senior executives fired Thursday by regulators. Furlong could not be reached for comment.

“I found it very frustrating that the regulators neither sought, nor seemed to need, my advice or cooperation,” Sanders said. “In fact, in the week that they were there, I only had two short conversations with them. It seems curious not to seek input from the chief financial officer in such crucial situations.”

An Insurance Department spokesman said no other top officers were let go this week. However, Fred Carr, who previously served as Executive Life’s chief executive, has not been an employee of Executive Life since regulators seized the company more than a week ago.

He continues to work as a company consultant on a short-term contract with the regulators, Deputy Commissioner Tom Epstein said. Carr remains chairman of First Executive.

Insurance regulators did take away Carr’s company-paid Porsche, Epstein added.

Meanwhile, industry experts maintain that there are serious questions about the objectivity of Sanders’ audit because of his decision to leave Deloitte & Touche to join First Executive. Sanders left the public accounting firm last May, when First Executive offered him a contract with a guaranteed base salary of $300,000, plus a $100,000 bonus in 1990 and a $200,000 guaranteed bonus in 1991.

He made no decisions about the audit after he was approached by First Executive, he said. But he later hired seven other Deloitte & Touche accountants, including three others who had helped compile First Executive’s audit.

Deloitte & Touche resigned from the job about a month later. In a filing with the Securities and Exchange Commission, the accounting firm noted that it had no disagreements with First Executive about its audit, and it did not issue an adverse opinion on the company’s financial statement.

However, it cited Sanders’ departure--and the loss of many members of its audit team--as a reason for the firm’s resignation.

Deloitte & Touche refused further comment.

“This would raise doubts in the mind of any reasonable person,” said Denise Kellogg, president of Kellogg Associates, a Los Angeles-based securities research firm. The situation appears to be similar to what happened in the savings and loan industry--particularly in the case of American Continental Corp., the parent of Lincoln Savings & Loan, Kellogg added.

American Continental sparked a congressional inquiry after it was revealed that the partner in charge of the company’s audit joined American Continental Corp. only months after giving the firm a clean bill of health.

According to congressional investigators, the accounting firm did not give any warnings about problems at Lincoln Savings, American Continental’s primary subsidiary, even though thrift regulators were then asserting that Lincoln was essentially insolvent.

Although First Executive’s new accounting firm, Price Waterhouse, now says there are substantial doubts about the insurance company’s ability to survive, Sanders maintains that his situation is nothing like that of American Continental.

He stands by the Deloitte & Touche audit and says First Executive’s financial condition is worse than it was a year ago because of the continuing deterioration in the junk bond market.

“There were no bonuses or anything unusual to indicate there was a conflict of interest,” Sanders said. “The firm and its lawyers looked at this very carefully and decided that there was no conflict of interest or independence problem with the company.”

Sanders added that his base salary of $300,000 is not any more than he was making as a public accountant. However, he said he was swayed by the promise of stock options, which could have been valuable had First Executive been able to turn itself around. Sanders was granted options to buy 181,818 shares of First Executive stock for 50 cents each. He was also guaranteed use of a company car and other benefits, according to his employment agreement.