Ban on Former S&L; President Overturned : Finance: Conduct by head of Delta thrift in Westminster ‘in no way’ justified federal regulators’ harsh measures, panel rules.

In a case rife with government misconduct, a federal appeals court threw out an order that had banned a former Westminster savings and loan president from the financial industry for life.

The U.S. 9th Circuit Court of Appeals ruled that the conduct of Young Il Kim in managing Delta Savings Bank “in no way” even approached the level of culpability required by federal law to impose such severe sanctions.

Kim’s conduct “certainly does not justify the imposition of such a Draconian measure” as a lifetime ban from the industry, the unanimous three-judge panel wrote in a decision filed Friday but released this week.

“I got justice from the court and I’m very happy,” said Kim, a certified public accountant in Los Angeles. “I have been suffering a lot for the past three years. When I was thinking the case over and over, I couldn’t find anything that I did wrong.”

The Office of Thrift Supervision, which ordered the ban, has two weeks to decide whether to seek a rehearing, appeal the decision or accept it, said William Fulwider, an OTS spokesman.

The agency seized an apparently healthy Delta Savings Bank three years ago and operated it until last spring, when it sold the deposits and closed the thrift. In seizing Delta, the agency accused Kim and three other directors of “egregious insider abuse,” and two of the directors eventually settled with the government.

The OTS brought its case against Kim and another director before an administrative law judge. But after six days of hearings two years ago, the judge, Arthur L. Shipe, found that the agency had failed to prove its case against them. That marked only the second time that the agency had ever lost a case before an administrative law judge.

Shipe also concluded that an OTS examiner had blackmailed the thrift’s executives into hiring her as chief operating officer at twice her agency salary and that she then gave the thrift bad advice, which led to the accusations against the executives.

The hearing also uncovered evidence that federal examiners were racially biased against Kim and three other Korean-born owners of Delta. A California thrift examiner testified that one of the federal regulators, in a telephone call to his superior, said he was “banging up the Korean.” Shipe, however, did not discuss possible bias in his decision.

As for insider abuse, Shipe found that the executives had not knowingly done anything wrong and that Delta didn’t lose money on four loans made to insiders.

But in April, 1993, Acting OTS Director Jonathan Fiechter overruled Shipe and ordered lifetime bans. Kim appealed, but the other director did not.

In finding that the OTS simply failed to support its action, the appellate panel sidestepped Shipe’s highly charged findings. The panel instead concluded that Kim did not know he was violating any banking laws and that the agency couldn’t prove that he was culpable of serious wrongdoing.

“Despite the OTS’ vehement use of such colorful words as ‘egregious’ to describe Kim’s conduct, the materials provided show only that Kim was one of several officers and directors who approved a few questionable loans . . . and that a few relatively minor and technical violations of certain banking regulations occurred,” the court said.

Kim has filed a lawsuit against the federal government, accusing it of racial motivations in seizing Delta and targeting him. The case, which is pending, seeks $100 million for Delta and $20 million for Kim.