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MAVERICK BANKERS : Reined-In Executives Seek Showdown With Regulators

First in a series. Next: Douglas Patty and his Heritage Bank, which was seized by federal regulators in March, 1984.

January 18, 1987|JAMES S. GRANELLI and JANE APPLEGATE | Times Staff Writers

In the last four years, Orange County has made a dubious mark as a center for failed financial institutions.

It has chalked up seven bank failures, six savings and loan collapses--including the seizure of Santa Ana-based North America Savings on Friday--and a rare thrift and loan demise.

In all, the county has been the home of about 23% of the federally insured financial institutions that have failed in California since 1982.

The aftermath of the bigger busts is a trail strewn with acrimonious lawsuits, millions of dollars in unpaid loans and uninsured deposits and stigmas on the careers of many bankers.

Government regulators claim that former executives took huge risks with other people's money to dabble in things they knew little about and to fund projects that benefited them and their associates.

The two federal agencies primarily responsible for mopping up after bank and S&L collapses--the Federal Deposit Insurance Corp. and the the Federal Savings and Loan Insurance Corp.--have charged many of these executives in civil lawsuits with racketeering, fraud, theft, negligence and other misdeeds and improprieties.

But four of the most controversial of these Orange County financial executives are not slinking off into the night.

The founders of Heritage Bank, American Diversified Savings Bank, Butterfield Savings & Loan Assn. and Consolidated Savings Bank are digging in for long legal battles.

In an unprecedented war against the regulators, the four one-time banking chiefs claim overzealous government officials thwarted their rescue plans and prevented infusions of new capital needed to save their institutions--institutions that they now stand accused of ruining.

They claim that federal examiners drastically discounted the value of their holdings and that young, inexperienced agents imposed their will over business matters they hardly understood. The regulators, they charge, failed to live up to their obligations under supervisory and settlement agreements and, in effect, forced their institutions to fail.

Those claims are now gathering some support even from the more traditional sectors of the industry. The California League of Savings Institutions, the powerful S&L trade group, has formed a special task force to analyze and make recommendations on complaints received by league members about federal examination policies and practices.

If the four Orange County bankers win--and no one has ever beaten the regulators badly--they would force drastic changes in the way the regulators handle troubled institutions. They would also walk away with millions of dollars in damages.

- Douglas E. Patty, 46, the bejeweled former head of the now defunct Heritage Bank in Anaheim, has sworn a fight to the finish with the FDIC, and he has the money to do it. He answered the agency's fraud and negligence suit against him and others by filing a suit charging the FDIC with breaching a settlement agreement it had signed with him seven months before the bank failed in March, 1984.

- Ranbir S. Sahni, 50, a one-time Indian air force jet-fighter pilot, is challenging the federal government's takeover of his American Diversified Savings Bank in Costa Mesa last February. He set up such a complex set of investment schemes that even industry consultants estimate that the FSLIC will lose at least $300 million trying to administer the S&L's ongoing transactions. Among his investments that regulators often criticized were wind-turbine farms in Northern California.

- Robert A. Ferrante, 36, a real estate developer and sole owner of Consolidated Savings Bank in Irvine, also has sworn to fight regulators to the end, and he also apparently has the money to do it. He responded to the FSLIC's suit against him and others by suing the Federal Home Loan Bank Board, parent of the FSLIC, for breaching an agreement to review and approve Consolidated's operating procedures in a timely fashion. A real estate deal he had with Sahni contributed to the downfall of Consolidated last May.

- Donald W. Endresen, 41, a real estate manager, syndicator and former chief executive of Butterfield Savings & Loan Assn., has sent letters to about 3,800 shareholders scoring the FSLIC's "unchecked power" and "intimidation tactics." He is seeking contributions for a special-purpose political-action fund to lobby Congress for a clamp on regulatory abuses. Though heavily criticized by regulators for buying the Love's barbecue restaurant chain and a Wendy's fast-food franchise territory, Endresen said that he had thought he was getting along well with the regulators in cleaning up Butterfield when it was seized.

Some regulatory executives blame deregulation for most of the bank and S&L failures, but industry leaders said it was not windmill farms or hamburger stands that caused the major problems: It was entrepreneurs run amok.

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