At her zenith, developer Kathryn G. Thompson was near the top of Orange County's hierarchy of home builders. The construction company that bore her name built more than 12,000 homes, apartments and condominiums in California.
Now, according to a lawsuit filed against her in March, the county wants Thompson to repay more than $1 million outstanding from a loan made in 1993. The predicament also is prompting county supervisors to take a hard look at how the loan was approved.
Once politically and socially prominent in Republican circles, Thompson, who crossed party lines in 1992 to support Bill Clinton, saw her company succumb to the recession of the early '90s that crushed land prices and left some builders weakened or bankrupted.
Still, when the county provided her new firm, a partnership called Americor Laguna Audubon, a $1.8-million construction loan for affordable housing in Aliso Viejo, officials thought it was a safe bet.
Until Americor defaulted and Thompson left town.
The problem now is, county officials don't know where to find Thompson. No one seems to know, or if they do, they aren't telling. Which has made serving her with the lawsuit moot at this point.
Thompson sought the loan to build the first phase of a project called Laguna Audubon Vistas. Although the entire, 440-unit subdivision was listed as affordable housing, the county's share was only to help pay for 25% of the costs associated with the initial phase of 60 condominiums.
The county was under pressure to approve a host of major developments in South County in the 1980s, and didn't require much affordable housing. In 1993, the Board of Supervisors adopted an affordable housing policy. One of the plans was to form partnerships with for-profit developers such as Thompson to increase the county's affordable housing stock.
On a motion by then-Supervisor Gaddi Vasquez and seconded by the late Tom Riley--a friend of Thompson whose district included Aliso Viejo--the loan package was unanimously approved and signed by then-Board Chairman Harriett M. Wieder.
But the way the loan was structured failed to protect the county from financial losses, county officials said. Such a loan would not have been approved under today's rigid post-bankruptcy checks and balances, say board Chairman Cynthia P. Coad, Supervisor Todd Spitzer and other county officials.
Thomas L. Beckett, the county's public finance manager, called the loan's structure "very unusual" because it did not make the county the first lien holder. He said its approval was also rare because the loan was made during a credit crunch, and when traditional lending sources had virtually ceased making loans on real estate projects.
Spitzer, for one, questions whether Thompson flexed her political muscle to secure the loan.
"That loan," Spitzer said, "is certainly the epitome of back-room deals, which exemplifies the good-ol'-boy way this county used to be run, and would only be approved today over my dead body."
Vasquez and Wieder knew Thompson socially, but neither recalled the vote, its background or details of the loan.
After the loan was explained to Wieder, she said the previous board may have failed to perform its fiduciary duty, but she took exception to Spitzer's characterization. "It's easy to make accusations, but he's also going to be leaving office one day, and other people will probably talk about him. I would never have said something like that."
According to the lawsuit, the loan was disbursed by Nations Bank, the main lender for Thompson's Aliso Viejo project. The bank had loaned $4.5 million and held the first lien on the project.
Thompson repaid about $900,000 to the county after drawing upon about $1.4 million that the county had backed of the original loan, Beckett said. The county's suit against her seeks the remainder plus interest since 1997.
The condominium project called for 15 complexes of 30 units each, but only one 30-unit complex was built. A new site plan was filed by Thompson's firm a year later to change to a different, more marketable housing style and lower density.
When Thompson's company defaulted in 1997, the bank foreclosed on the property. It was sold for about $2 million to the development company D.R. Horton, which completed the project. The sales price was barely enough to satisfy the bank, which left the county, as the second lien holder, without any sale proceeds, Beckett said.
County policy on loans has been changed as part of the post-bankruptcy tightening. Now, such a loan would require more collateral and place the county as the primary lien holder to buffer the county's financial liability, Beckett said.
In briefings with supervisors, sources said county staff was reluctant to find Thompson and recover any of the $1 million she owes. Staffers contended that even if Thompson could be located, she may not have any assets; thus, the county would have lost even more money pursuing her.