Top executives at failed Homefed Bank awarded themselves “egregious and excessive” golden parachute severance packages totaling $18 million after the thrift had begun to fail, a top banking regulator told a congressional hearing Wednesday. The packages were subsequently annulled by regulators.
Also, in another example of alleged overcharging after the thrift’s demise, the Grant Thornton accounting firm billed the government $11 million for $1 million worth of subcontracted clerical and security services work for the agency now managing Homefed, a government inspector said.
The revelations, part of testimony at a House Banking Committee hearing called to examine Homefed’s demise, added more controversy to the Homefed debacle, one of the nation’s costliest thrift failures. They also come as several Homefed executives are said to be the subjects of criminal investigations regarding their handling of the thrift, according to federal officials.
The golden parachute separation packages for 30 Homefed executives, including former Chairman Kim Fletcher and former President Robert Adelizzi, were annulled by the Federal Deposit Insurance Corp. with a cease-and-desist order, FDIC regional director George J. Masa told the hearing. It was not disclosed how much each executive would have received.
Neither former executive could be reached for comment.
The Grant Thornton overcharges were detailed in written testimony filed by the inspector general’s office of the Resolution Trust Corp., the agency managing Homefed. Earlier it had been disclosed that the accounting firm of Price Waterhouse overcharged the RTC by $5 million for Homefed photocopying--billing at the rate of 67 cents a copy.
The report, which said the RTC was partly to blame for poor cost controls and supervision, said the RTC has since negotiated a reduction in the Price Waterhouse bill but is still disputing the Grant Thornton charges.
The inspector general’s audit found that Grant Thornton added $10 million to a bill that should have been submitted at cost. Grant Thornton and Price Waterhouse were hired by the RTC to help it manage the disposition of Homefed and to go over its books.
Grant Thornton officials could not be reached for immediate comment.
The July, 1992, failure of Homefed, once the nation’s eighth-largest thrift, so far has cost taxpayers $1.2 billion, although the final cost is expected to rise, said RTC Senior Vice President Lamar C. Kelly. The thrift failed due in part to the souring of risky commercial loans and failed development deals.
Homefed’s remaining 136 Southern California branches will be sold to a bidder or bidders in October, Kelly said.
Homefed executives, including Adelizzi, were named in a July affidavit filed by the U.S. attorney’s office in San Diego. The affidavit alleges that the thrift, seeking to cover up its inadequate amount of capital, engaged in a “sham transaction” in 1990 involving a master-planned residential community.
While declining to confirm a criminal investigation, a source close to the investigation said that “underlying criminality” is implicit in the affidavit.
When, at the hearing, committee chairman Henry B. Gonzalez (D-Tex.) asked Office of Thrift Supervision Deputy Director John F. Downey whether criminal investigations of Homefed executives are under way, Downey responded that he was unable to comment on pending criminal investigations.
“You’ve just answered my question,” Gonzalez said.