The Australian owners of Universal Savings Bank on Wednesday accused the state savings and loan commissioner of relying on "unsubstantiated and untrue allegations" made by a disgruntled director to justify the unprecedented takeover of the healthy, Orange-based S&L.
Christopher Blaxland, the suspended chairman of Universal and a director of Universal's parent company, Unity Group Ltd. of Sydney, Australia, characterized the state's action as "outrageous" and said the company is considering legal action to regain control of the savings bank.
In an unusual move Tuesday, the state agency seized control of Universal and installed a conservator, William Davis, to oversee its operations while the department investigates allegations that Unity intended to divert funds from Universal.
Diversion of Funds Alleged
William Crawford, state savings and loan commissioner, said he authorized the state takeover of Universal after employees of the institution approached him Monday with information alleging the possible diversion of funds to Unity.
Universal, which reported assets of $308 million and net worth of $12.5 million at the end of 1986, was acquired by Unity at that time. Headquartered in Orange, it is the only California savings and loan owned by foreign interests.
Crawford said he was concerned about reports of financial difficulties experienced by Unity, which recently initiated a plan to reduce debts and other obligations resulting from an unsuccessful takeover bid for another Australian company, Humes Ltd.
Blaxland, who serves on the boards of both Universal and its parent company, described Unity's financial condition as excellent. He said Unity, a holding company with interests in dozens of public and private firms, reported assets of $418 million, net worth of $183 million and surplus cash of $37 million, as of March 31.
He said Unity has no need of funds from Universal and has never considered "any wrongful application of Universal's resources."
Blaxland said the state's action was prompted by fellow Universal director Christopher Gadsby. Blaxland said Gadsby had resigned from Universal's board Sunday in the midst of an internal investigation of questionable lending practices.
Gadsby, contacted at Universal's offices Wednesday, denied that he had resigned from the board and would not comment on Blaxland's report of an internal investigation into lending practices. But Gadsby acknowledged that he and several Universal employees approached the state Monday with information about the potential diversion of funds by Unity.
According to Blaxland, concerns about a number of recently approved and pending loan applications prompted him to initiate an internal investigation of Universal's commercial lending division about two weeks ago. As a result of that investigation, he said he suspended three division employees Monday.
Blaxland said Gadsby, who had supported the loan applications under internal investigation, resigned his board seat Sunday "in the face of charges of personal misconduct in connection with the affairs of the bank."
Allegations Called Untrue
"Those allegations are totally untrue and have no basis," Gadsby said.
Blaxland also criticized the state for seizing control of Universal without first discussing the matter with Universal directors and added that Unity expects to file a lawsuit to challenge the action.
"We are certainly going to be taking our own legal proceedings," he said. "Our lawyers our working on it at this moment. This is a public company group, we have a significant investment in Universal Savings Bank, and we clearly have duties to our shareholders to take every possible step to protect the integrity of that investment."
Crawford said that Universal will remain open for business while the state investigation is in progress and that all deposits are still insured up to $100,000 by the Federal Savings and Loan Insurance Corp.