Janet F. McKinzie kept a caricature of herself hanging on her office wall at North America Savings & Loan Assn. The caption stated: "Master of Disaster."
The title is appropriate, according to federal regulators who are trying to unravel what happened at the failed Santa Ana savings institution.
In an amended complaint filed last month in U.S. District Court in Los Angeles, the Federal Savings and Loan Insurance Corp. alleged that McKinzie and 54 individuals and companies turned North America Savings into a financial disaster through a complex series of sham transactions.
State regulators alleged that it is the worst case of insider fraud ever uncovered at a California savings and loan.
As investigators continued to pore over truckloads of records, FSLIC lawyers said they expect to add more defendants and more claims to the lawsuit.
They alleged that McKinzie and the late Duayne D. Christensen, North America's founder and chairman, set up at least 120 companies for various purposes and that just a handful have been thoroughly investigated so far.
To ensure against loss of potential evidence, Mayer, Brown & Platt, a Los Angeles law firm retained by FSLIC to pursue the lawsuit and find out what happened to the S&L's assets, is duplicating and microfilming documents and storing copies elsewhere.
McKinzie has so far refused to comment on FSLIC's allegations. Her lawyers said they have not read the agency's 118-page amended complaint because she has not been able to pay them. A court hearing on their request to be relieved from representing McKinzie is scheduled for Oct. 19.
Her lawyers said, however, that while McKinzie expects to be indicted on criminal charges arising from the ongoing investigation, she has said that she is innocent of wrongdoing.
State regulators seized North America Savings on Jan. 16--hours after Christensen was killed when his brown 1985 Jaguar crashed into a bridge support on the Corona del Mar Freeway.
A week later, the state determined that North America Savings was insolvent and called in federal regulators, who closed the institution and transferred its assets to a newly chartered federal S&L of the same name.
FSLIC was appointed receiver and began sifting through thousands of documents. Investigators found scores of seemingly bogus deposit accounts, signatures believed to be forged, false statements and evidence of conflicts of interest and an elaborate cover-up, according to the lawsuit and previously filed court documents.
The suit alleged a conspiracy to artificially inflate the net worth of North America Savings to create the illusion of profitability and to ward off regulatory scrutiny.
The mastermind behind the systematic "looting" of the S&L, the suit said, was Christensen, a Westminster dentist who gave up his dental practice to engage in other businesses.
Christensen formed North America Savings in September, 1983. The FSLIC suit said he and McKinzie then used the S&L's millions of dollars in federally insured deposits for their personal benefit.
McKinzie was Christensen's confidante, business manager, sole heir and only beneficiary of his $10-million life insurance policy, the proceeds of which are being held in escrow until the court resolves competing claims by the S&L, Christensen's three children and others.
McKinzie, who began working with Christensen in 1980, was also his fiancee, said Kent P. Larsen, an independent insurance agent who put together the $10-million life insurance policy.
And McKinzie was "de facto vice chairman" of North America Savings, even though she was hired only as a consultant, FSLIC said in its suit.
The network of family members and professional associates assembled by Christensen to help carry out his investment schemes dates back at least to Aug. 29, 1971, when Christensen formed Newport Equities Trust, the suit said.
Newport Equities was a business trust and the primary vehicle for Christensen's investments. Christensen owned 27% of the trust and persuaded a number of doctors and dentists to invest with him.
"North America Savings appears to have been operated as a shadow entity of Newport Equities," Erickson said. Major Newport Equities properties were sold to the S&L, the suit said, with the trust liquidated in 1984.
One scheme detailed in the suit--the Summerton project--is typical of the way in which Christensen, McKinzie and their associates are accused of siphoning money from North America Savings, said attorneys from Mayer, Brown.
The project involved the purchase and purported development of condominiums on 13 acres near San Jose.
The suit said more than $6.4 million in S&L deposits were funneled into the hands of Christensen, McKinzie or their associates through a repurchase scheme and through kickbacks from Summerton vendors and subcontractors who provided no services or materials.