Simon Could Be Called to Testify at Trial in S&L; Suit

The U.S. Justice Department has put Republican gubernatorial nominee Bill Simon Jr. on its witness list for a savings and loan trial that starts next month in Washington.

The tentative schedule would have Simon on the stand Oct. 16--less than three weeks before the election.

The trial stems from a lawsuit that Simon and other investors in the former Western Federal Saving and Loan filed against the government. The Simon family lost its $40-million investment in Western Federal, which was based in Marina del Rey, and hopes to win at least some of it back.

The government seized the S&L; in 1993 at a cost to taxpayers of $122 million.

The trial before Judge Emily C. Hewitt at the U.S. Court of Federal Claims in Washington is scheduled to start Sept. 17 and finish by Oct. 18.

In court papers, the Justice Department has named Simon as one of 26 witnesses it may call. Simon would testify for up to two hours on “the strategies, plans, operation and condition” of Western Federal and its holding company, Justice Department lawyers wrote in court papers.

Justice Department spokesman Charles Miller said the government had not subpoenaed Simon, but “that may change.”

For Simon’s campaign, the candidate’s testimony would draw untimely attention to what Gov. Gray Davis has cited as one of his rival’s biggest failures as a businessman.

In television ads, the Democratic incumbent has blamed the government’s “bailout” of Western Federal on mismanagement by Simon. “On top of it all,” a narrator says in one ad, “Simon is suing the government, asking taxpayers to pay him back his investment.”

Simon has denied wrongdoing and accused Davis of grossly distorting his role at Western Federal.

Simon did not run day-to-day operations at the S&L.; He was, however, a member of the team that oversaw those who managed the thrift. For two years, Simon was on the Western Federal board of directors. For the next two years, he served on the board of Westfed Holdings Inc., a company that owned one business: Western Federal.

The Simon investors said the government improperly seized Western Federal after breaking an agreement that it struck with the investors when it acquired the thrift in 1988.

“The government didn’t keep its word on this issue, so we feel we’re on the right side,” said Simon campaign spokesman Mark Miner.

The government, however, has argued in court papers that the Simon group made an ill-advised investment in Western Federal, then retained executives who mismanaged the S&L;, making its collapse inevitable.

The Davis reelection campaign has cast Western Federal’s failure as evidence that Simon is not the successful businessman he portrays himself to be. The Davis effort was bolstered by widespread news coverage of a fraud verdict handed down by a jury July 30 in a separate case against Simon’s investment firm, William E. Simon & Sons.

Since then, Simon has struggled to shift the campaign’s focus to Davis’ track record as governor.

Allan Hoffenblum, a GOP consultant, said, “The only way Simon can get back into the game” is “to turn the race back into a referendum on Gray Davis.”

“If it’s three weeks before the election, and the issue is still Bill Simon, and not Gray Davis, he’s in trouble anyway,” Hoffenblum said.

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Robert Patrick of The Times’ Washington bureau contributed to this report.