Owners of Failed Guardian Thrift Pay $8.5 Million : Settlement: Russell M. and Rebecca M. Jedinak admit no wrongdoing in the collapse of their Huntington Beach S&L;.
Paying one of the larger thrift industry fines for individuals, the former owner of Guardian Savings & Loan and his wife have turned over $8.5 million to settle claims stemming from the S&L;’s 1991 collapse.
Russell M. and Rebecca M. Jedinak also agreed to a lifetime ban from the government-insured banking industry. They did not admit any wrongdoing in settling and paying the restitution earlier this month, the Office of Thrift Supervision said Monday.
The failure of Guardian is expected to cost taxpayers $139.7 million, regulators said.
The Jedinaks, who previously have refused to talk publicly about the federal takeover, said in prepared remarks that they settled to avoid the high cost of litigation and the interruption of their current mortgage-lending business, Quality Mortgage Inc. in Irvine.
Russell Jedinak said that “we were the real losers when the regulators ousted us from Guardian because we lost millions of dollars on our investment.”
Their lawyer, Joel E. Boxer, said the settlement also requires the Resolution Trust Corp., the federal agency charged with liquidating failed thrifts, to return $1 million in pension plan funds to the Jedinaks.
Boxer, who refused to say how the Jedinaks came up with so much money to pay the restitution, pointed out that the case was settled without the agency ever filing specific charges against the Jedinaks.
Because formal charges never were filed, the agency did not make detailed findings.
Nevertheless, the OTS said in settlement papers that it found that the Jedinaks received loans at no interest or at rates “substantially below” what the public paid, used Guardian to pay such personal expenses as trips and maintenance of personal property and violated numerous banking laws and regulations.
Guardian’s inadequate internal controls, sloppy record-keeping and a variety of other improper acts--including covering overdue mortgages with payments from other mortgages--doomed it.
Jedinak pioneered the sale of risky home loans directly to Wall Street investors, thus bypassing the quasi-governmental Federal National Mortgage Assn. (Fannie Mae) and the Federal Home Loan Mortgage Corp. (FreddieMac) and their conforming regulations.
Guardian, which had $639 million in loans and other assets, was extremely aggressive and took loans from brokers that it shouldn’t have, industry leaders said. Regulators found that many loans sold on Wall Street were not on owner-occupied properties as promised in securities filings. Criminal charges were filed against a number of independent loan brokers for helping to falsify loan documents given to the thrift.
Its biggest problem was its 14-story headquarters building on Beach Boulevard at Warner Avenue. Jedinak bought the building for $55 million, but regulators ordered them to lower the value, thus putting Guardian in such poor financial shape that its fate was sealed. Regulators seized the thrift and sold the building for $22 million.
The OTS said the Jedinaks’ restitution is one of the larger individual amounts paid by former S&L; executives. Numerous ousted executives, particularly several in the collapse of Lincoln Savings & Loan in Irvine, have agreed to pay higher amounts should the agency ever find that they have hidden any money.
Convicted Lincoln operator Charles H. Keating Jr. was ordered to pay $36.4 million but is broke and in prison. His son-in-law, Robert M. Wurzelbacher, agreed to pay $30 million but was allowed to turn over only $133,000 from the sale of some land he owned.
Corporations have paid much more. The accounting firm of Ernst & Young has paid the OTS the most, $420 million, to settle charges stemming from the firm’s audits of Lincoln and other major thrift failures.
