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'Witch Hunt' Described

June 13, 2002|MICHAEL FINNEGAN | TIMES STAFF WRITER

The witness was Bill Simon Jr.

"It was a witch-hunt mentality," he testified.

"Pardon?" asked Thomas P. Reilly, a U.S. Justice Department lawyer.

"It was that kind of mentality," Simon replied. "It was a witch-hunt mentality."

"On the part of the regulators?" Reilly asked.

"Absolutely," Simon said.

The scene was Simon's deposition in an office on Wilshire Boulevard. It was 1999, six years after the collapse of Western Federal Savings and Loan. Simon, now the Republican nominee for governor of California, and his family lost their entire $40-million investment in the Marina del Rey thrift.

"What do you mean by 'witch-hunt mentality?' " Reilly asked.

"They always assumed that you were doing something wrong," Simon testified. "They always assumed that it was guilty until proven innocent, and it was a tough environment to operate under."

Simon described the government scrutiny as "unbelievably" tight. "We literally--maybe figuratively--couldn't go to the bathroom without checking with the regulators," he testified.

Simon recalled with bitterness his occasional meetings with them during his four years on the boards of the S&L and its holding company, WestFed Holdings Inc. Government monitors "were telling us how to run the business," he testified.

"They treated us, honestly, like we were third-class citizens, and that was a source of difficulty on occasion."

The deposition was part of a lawsuit against the government by the Simons and their investment partners. They contend the government's seizure of Western Federal was improper and are seeking tens of millions of dollars in damages. The government says mismanagement caused the S&L's collapse.

The U.S. Office of Thrift Supervision, which monitored Western Federal, released a statement this week in response to Simon's remarks.

"OTS conducts fair and impartial examinations of its institutions," it said. "The goal of our examinations is to ensure the safety and soundness of the thrift institutions and protection of the deposit insurance fund."

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