The feds mount solid case against Thomas Spiegel; thrift experts say his spending habits are hard to defend.

The feds mount solid case against Thomas Spiegel

Thrift experts say his spending habits are hard to defend

The Office of Thrift Supervision has a solid case against Thomas Spiegel, the former head of Beverly Hills-based Columbia Savings & Loan, according to several thrift experts.

"It does not pass the smell test when someone is paid so much and takes so many perks for personal use and the next year the company's financial solvency is thrown into question," said Timothy J. Harris, a partner at the Century City law firm of Charleston, Revich & Williams.

The OTS seeks restitution of $19 million that it claims Spiegel misappropriated for personal use and $5 million as a civil penalty.

Among the abuses Spiegel is charged with are:

* $6.4 million spent on an airplane hangar for a corporate plane.

* $5.75 million for losses from a $28 million loan to Spiegel crony Howard Schneider, a car dealer.

* $2.87 million for an unauthorized bonus in 1989.

* $1.1 million for personal use of condos in Indian Wells; Jackson Hole, Wyo. and Park City, Utah.

Other abuses include the purchase of more than four dozen guns, a wine-tasting course taken by Spiegel and his wife, and tickets to rock concerts.

"It is difficult to justify those kinds of expenses when you're running an S&L," Harris said.

Others agreed with Harris but refused to speak for attribution, saying they did not know enough of the details to comment on the record.

The OTS's case, nonetheless, may not be airtight. Keith Holmes, a partner at the bond market, the primary source of the institution's current troubles.

The OTS's case, nonetheless, may not be air-tight. Keith Holmes, a partner at the Century City law firm Fried, King, Holmes & August, questioned whether the OTS has the authority to freeze Spiegel's assets. "It's the first time I have seen that in an enforcement proceeding," he commented.

Others said they expect the case to ultimately end in a settlement, although no one anticipates anything happening soon. Mike Conover, president at the Westwood office of the investment bank, Ryan Beck & Co., pointed to the pace of the case against Charles Keating, the former CEO of Irvine-based Lincoln Savings and Loan, one of the most notorious thrift failures.

"I thought they would have been able to nail him a while ago, but that case is still dragging on," he said.

Beyond Columbia, the Spiegel case has ruffled few feathers in the beleaguered thrift industry. "The action is Spiegel specific," Harris remarked. "In most institutions people did not buy machine guns and take trips to Europe on the company's expense," he added.

"No one is going to be affected except those who realize they are being targeted as bad guys," said Norm Katz, managing partner at MCS Associates, a division of Grant Thornton, an accounting firm.

That does not mean the action is an isolated event. Katz, for one, said it reflects a more aggressive stance by the OTS in its enforcement duties.

"Those who were doing something wrong a few months ago have probably stopped and are lying low," Conover said.

According to Katz, this would be the exception, not the rule, among thrift executives, because most of the wrongdoers have probably already exited the industry.

For those remaining in the industry, the main result of stepped-up enforcement may be mounting legal bills. In increasing numbers outside directors, nervous about potential suits from regulators or shareholders, have retained outside counsel to vet corporate actions, according to Katz and Holmes.

This could have a chilling effect on an S&L's legitimate risk-taking, Holmes suggested. "People are going to run an S&L from the vantage point of contingent liability instead of whether something is the best business decision," he explained.

Holmes also thinks thrifts may have more difficulty in the future recruiting officers and directors. "Why would anyone want to serve as a director or officer of one of these companies?" he asked.

The Spiegel case also comes at a time when federal bank and thrift examiners have begun to take a closer look at executive perks, although this has always been one of the areas examiners investigated, Douglas McEachern, partner at the downtown office of Deloitte & Touche, said.

The Spiegel case aside, some have expressed consternation the regulators have in fact become heavy handed in their enforcement actions. "Some feel the enforcement powers have gone too far and are way too punitive," Holmes said.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 "does not afford adequate due process to those charged," Holmes claimed.

Regardless of how strong a case industry experts believe the OTS has against Spiegel, they all agree with Spiegel's contention that the OTS was politically motivated to appease pressure coming from Congress to take bold action.

The OTS announced at the same time that it would open up its enforcement proceedings to the public except when they involve institutions still operating independently for fear of creating a run on deposits.