Regulators Shut Irvine S&L Run by Vocal FHLBB Critic

May 23, 1986|JAMES S. GRANELLI | Times Staff Writer

Consolidated Savings Bank, a small Irvine S&L run by a man who has been fiercely critical of industry leaders and regulatory policies, was declared insolvent and seized Thursday by state and federal regulators.

It is the 16th S&L in the nation, the sixth in California and the second in Orange County to fail this year. In addition, two Orange County commercial banks have been taken over by regulators this year.

In Thursday's action, the Federal Savings and Loan Insurance Corp. was named conservator to continue running Consolidated as a state-chartered savings bank.

A spokesman for the Federal Home Loan Bank Board said the S&L, which had $84.3 million in assets, "had substantially dissipated its assets and earnings" through a series of risky or prohibited practices, including lending money to insiders.

Los Angeles Times Saturday May 24, 1986 Orange County Edition Business Part 4 Page 2 Column 4 Financial Desk 1 inches; 27 words Type of Material: Correction
Consolidated Savings Bank of Irvine was seized and declared insolvent by federal and state regulators on Thursday. No other Irvine-based financial institutions were affected in the action.

But while Consolidated was declared insolvent, the spokesman said the S&L still has capital and is capable of earning income--which was why it was not closed and put into receivership. In addition, he said, no FSLIC money will be needed to keep the savings bank going.

All depositors will have access to their entire accounts, including balances exceeding the $100,000 maximum insured by FSLIC, said David Loveday, spokesman for the bank board, the federal regulatory agency that oversees the FSLIC and all FSLIC-insured S&Ls.

The bank board hired Household Bank, a federally chartered S&L in Newport Beach, to provide a management team to operate Consolidated. Household named a senior vice president, Charles A. Colip, to head the team. Regulators also appointed a three-member board of directors to set Consolidated's new operating policies.

The FHLBB also released Consolidated's 10 top managers but kept the S&L's remaining 15 employees.

The takeover ends the short reign of industry maverick Ottavio A. Angotti, Consolidated's chairman and chief executive since it opened in February, 1984. Angotti, 50, a banker for 29 years, has been critical of bank board policies that he claims restrict S&Ls in general and small savings institutions in particular.

He also challenged the industry's leadership clique by running in last fall's election for a seat on the regional Federal Home Loan Bank of San Francisco, which acts as a credit facility for S&Ls in California, Arizona and Nevada.

Angotti claimed in his election campaign that executives of the state's largest S&Ls had a lock on the regional FHLB's board of directors and supported bank board regulations that favored large institutions by restricting the growth and investment policies of smaller institutions.

Consolidated, for instance, co-sponsored a recent seminar with the U.S. Department of Commerce and the Irvine Chamber of Commerce on export trading companies, a business in which S&Ls are not permitted to participate.

Neither Angotti nor Consolidated's sole owner, Newport Beach developer Robert A. Ferrante, could be reached for comment Thursday.

But Angotti had charged in prior interviews that the regulators were bent on shutting his operation down because of his outspokenness during and after his well-publicized election challenge, which he lost.

Loveday would not comment on Angotti's allegations of a vendetta by regulators.

The bank board said Consolidated's problems were the result, in part, of a rapid growth strategy in 1985, largely through use of high-cost jumbo certificates of deposit, "which were used to fund risky and poorly underwritten commercial loans."

Consolidated also engaged in "numerous unsafe and unsound practices and regulatory violations, including making loans to affiliated persons, extending loans to one borrower in excess of limitations and failing to acquire adequate appraisals," the spokesman said. He declined to name any of the loan recipients.

According to a state Department of Savings and Loan report filed by Consolidated, the S&L had $75 million of its $80.8 million of deposits in jumbo CDs at the end of last year.

The report also showed that Consolidated had a net income of $2.6 million last year as a result of a $3-million gain on the sale of real estate it held for investment.

"The operation was very suspect for some time," said Gerry Findley, a Brea banking consultant and publisher of the California Reports on California Savings and Loans.

Findley doubted that regulators had any vendetta against Angotti.

"Everyone's unhappy with the bank and S&L regulators," he said. "What it really comes down to is the point that the association was not being managed in a way acceptable to the regulators. So many of these new institutions got off on a tack that they had apparently a feeling that depositors' money, which is really trust money, is for their own use. That can't happen."

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