New president and capital at World Trade Bank.

Feds give orders; William Simon increases his stake

Former U.S. Secretary of the Treasury William E. Simon has increased his stake in a Beverly Hills bank which has been ordered by the Office of the Comptroller of the Currency to re-inject $10.5 million and name a president to run the bank.

World Trade Bank operated with negative capital of $300,000 and without a president or chief executive officer for a few months this spring, said Bill T. Hughes, who was appointed president and CEO two weeks ago. However, the bank has since been re-injected with $3.9 million from Simon and it now meets all federal capital standards, Hughes said.

In the OCC order, which was signed by the bank's board of directors on May 14, World Trade Bank was also ordered to withhold dividends until certain conditions were met, including developing a capital plan and complying with the plan.

Simon, who reportedly had a smaller, but controlling interest of the bank with a business partner before the order, said in a statement: "The Simon family has reaffirmed its commitment to World Trade Bank and has substantially increased its controlling stake.

"We have great confidence in the competence of those who are currently in top executive positions (of World Trade Bank) and will continue our efforts to strengthen management when appropriate," said Simon, who was Secretary of the Treasury under President Gerald Ford.

Simon reportedly had shared working control of World Trade Bank with Gerald Parsky, a partner at Los Angeles law firm Gibson Dunn & Crutcher. The two, who also were major shareholders in a number of thrifts, including Western Federal Savings & Loan and Southern California Savings, are currently dissolving their partnership interests, according to published reports.

Parsky is not a director of World Trade Bank and "soon will not be an equity holder as well," said Greg Miller, spokesman for Parsky.

For the last three years, Roger Hill was the president and CEO of World Trade Bank. He resigned in mid-March as part of an "internal decision" reached between Hill and the bank's board of directors, said Rivian Bell, outside communications counsel for the bank. Hill could not be reached for comment.

Hughes, who was formerly president and CEO of Century City-based Mercantile National Bank, was appointed president and CEO of World Trade Bank in June.

Ray Doumani, chairman of World Trade Bank's board, said in a statement that Hughes was working as a consultant for the bank during the months when there was no official bank president.

In the OCC order, World Trade Bank was also told to hire an independent consultant to prepare an organization chart for the bank and assess whether the bank's directors are receiving adequate information about its operations. World Trade Bank was also ordered to establish a system to deal with problem loans and to try to identify sources of repayment for non-performing loans.

The bank was also ordered to revise its real estate appraisal policy so that it conforms with federal laws.

"We wouldn't be telling them to fix something if it weren't broken," said Ellen Stockdale, director of communications for the Office of the Comptroller of the Currency. She noted that World Trade Bank's directors signed the order, which means they indicated they would try to comply with regulators' orders.

"If we believe they are not trying, we can take further action," Stockdale said. "The further action can be public hearings, we can remove the board of directors, there's all kinds of things we can do."

Stockdale said that the action against the bank, called a consent order, involving an agreement with bank officials is "not terribly common." In some cases, regulators will issue an order if bank officials have not responded to previously stated concerns or if regulators are concerned about the financial safety and soundness of the institution, she said.

In another, unrelated consent order from the OCC, restrictions were placed on Burbank-based Western Security Bank's ability to make loans, unless the bank meets certain conditions.

The institution, which has assets of $71 million and capital of $6.8 million, is "well above" all federal capital ratios, said Tom Batt, senior vice president and cashier of the bank. "We are under an administrative order. . . . We're working on the problems," he said.

Western Security Bank was ordered to hire an independent consultant to evaluate "the adequacy of the current staffing" as well as the qualifications of senior managers running the bank. The independent consultant is also charged with reviewing the deterioration of the bank's loan portfolio.

The Burbank bank was also ordered to rewrite its loan policy and was restricted from granting loans unless borrowers present the bank with credit information. In the order, Western Security Bank was also admonished to document the valuation of collateral for loans.