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Official Bans Ex-O.C. Thrift Directors : Regulation: Two who served failed Delta Savings Bank are penalized by head of U.S. agency who overrules a judge's findings.

April 23, 1993|JAMES S. GRANELLI | TIMES STAFF WRITER

Overruling a judge's recommendation in a case fraught with government misconduct, the nation's top thrift regulator has imposed a lifetime industry ban on two former directors of failed Delta Savings Bank in Westminster.

Jonathan Fiechter, acting director of the Office of Thrift Supervision, ruled that the two former directors--Young Il Kim and Michael Kim, who are not related--cannot work as top executives in any regulated financial institution. Fiechter did not, however, order them to pay any restitution.

The OTS order, issued April 15 but not made public until Thursday, is the first to reject the findings of an administrative law judge in an agency enforcement action and to impose a penalty after a judge had determined that none was warranted.

In his opinion, Fiechter ignored the government's own wrongdoing, mainly the judge's conclusion that one examiner blackmailed the thrift's executives into hiring her and then gave the thrift bad advice. He also failed to discuss charges arising in an administrative hearing last year that federal examiners were racially biased against the Korean-born owners of Delta.

"This is outrageous," said Robert P. Beckham, a Toluca Lake attorney for Young Kim, an accountant who was also Delta's president. "You have six days of hearings, the judge writes a 63-page decision and then the acting director decides to reverse it."

Beckham said his client will probably appeal the ruling in federal court. Michael Kim's business adviser, Thomas Rhee, said he had not yet informed Kim of the OTS ruling and was not sure if Kim could afford to appeal it.

"It's really, really amazing what OTS is doing," Rhee said. "Where is the justice?"

Michael Kim's former lawyer, Brian Baumeister, called the ruling "unfortunate." He said everyone knew that the judge's decision in August would not be final until the OTS director passed on it.

Michael Kim was an outside director not involved in day-to-day operations of the thrift. But regulators have been pushing boards in the past year to take more notice of what management is doing.

Delta, a small thrift that regulators seized in November, 1991, would be a forgettable failure in the industry debacle if not for the judge's decision. Administrative Law Judge Arthur L. Shipe, who had presided over the hearings on the agency's enforcement action against the two directors, found that the OTS had failed to prove that the men had knowingly done anything wrong or that they had caused the thrift to lose any money.

His ruling marked only the second time that the agency had lost an enforcement action. Former OTS Director Timothy Ryan, on his last day in office in December, followed a judge's recommendation in the other case and dismissed it. That case involved failed Newport News Savings Bank in Virginia.

Delta still hasn't lost any money from the actions of the two directors. The four loans that Fiechter focused on in arriving at his 30-page decision are still performing, Beckham said.

In banning the directors from the industry, Fiechter said that they had engaged in a "pattern of repeated violation of laws and regulations governing lending practices."

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