YOU ARE HERE: LAT HomeCollections

Official Says Ailing Ohio S&L Got Special Treatment

September 18, 1985|Associated Press

COLUMBUS, Ohio — Home State Savings Bank got state regulatory approval to spend nearly $2 million on branches across Ohio despite being given the lowest rating possible by state banking examiners, a state official said Tuesday.

Richard F. Kuhnheim, an examiner with the state's Division of Savings and Loan Assns., said that former Savings and Loan Superintendent Clark Wideman approved 10 branch openings for Home State in the waning days of his administration in early 1983.

Kuhnheim said he had recommended against the branches because of a July, 1982, examination by chief examiner Sylvester Hentschel that gave Home State a No. 4 rating because of its "unsafe, unsound practices."

Kuhnheim said a "4" rating was the lowest possible at the time and indicated "major problems" at Home State.

His comments came before a joint Ohio legislative committee that is investigating Home State, which closed March 8 after runs by depositors alarmed at the collapse of a Florida brokerage company in which Home State had invested heavily.

Prompted Other Runs

Home State's collapse prompted runs at some other privately insured Ohio thrifts, and Gov. Richard F. Celeste ordered all of them temporarily closed March 15.

Kuhnheim said Home State received unusual treatment from Wideman and others in the state Commerce Department during the final days of the administration of former Gov. James Rhodes, a Republican, and again during the administration of Democratic Gov. Celeste. Kuhnheim said that he and other examiners felt "betrayed" by their superiors' favorable treatment of Home State.

"I always felt that the last line of defense . . . was to protect the public," he said. "And here we were, letting the public down."

Kuhnheim said Home State applied in November, 1982, to open three Columbus branch offices and to relocate a Middletown office at a total cost of $1.2 million. He recommended against approval of the branches because of Home State's low net worth and operating losses.

He said, however, that Wideman eventually approved the applications and personally brought Kuhnheim seven more Home State requests to open branches in seven Kroger stores. The cost to open those branches was estimated at $616,000, and Kuhnheim again recommended that the applications be denied.

Kuhnheim said he did not understand Wideman's personal interest in the Home State applications.

Puzzled by Urgency

"I was confused," he said. "I couldn't understand why the urgency, and the thought occurred to me that perhaps he wanted all this processed to dump on the lap of a new administration."

Wideman was superintendent of the Savings and Loan Division when Rhodes left office in January, 1983, and was replaced by C. Lawrence Huddleston after the Celeste Administration got in office.

"Mr. Wideman upset us and probably demoralized us, but he was leaving," Kuhnheim said. "Unfortunately, Mr. Huddleston turned around and approved more branch offices for Home State."

Home State was controlled by Cincinnati financier Marvin Warner, a contributor to Celeste's 1982 gubernatorial campaign.

Los Angeles Times Articles