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New Owners for Beverly Hills Savings

April 24, 1985

BEVERLY HILLS, Calif. (AP) _ The head of failed Beverly Hills Savings & Loan Association said Wednesday his biggest mistake was failing to recognize the thrift’s dire financial situation when he took over a year ago.

″The only thing for which I am willing to take blame was not fully understanding the disaster we had on our hands,″ said Paul Amir, who heads Beverly Hills-based Amir Development Co.

Amir took over the troubled, state-chartered thrift in April 1984 after a protracted and bitter battle with its previous management which he accused of being ineffective. It is the 23rd-largest S&L in California.

The thrift was declared insolvent Tuesday night by the Federal Home Loan Bank Board, which oversees the savings and loan industry.

Operation of the seven-branch institution was transferred immediately to a newly chartered company, Beverly Hills Federal Savings & Loan Association, which opened for business Wednesday.

Bank board spokesman Don Alexander said the offices of Beverly Hills Federal were crowded with worried depositors Wednesday.

″Obviously, in any situation like this there is a lot of anxiety,″ Alexander said.

However, all deposits of the failed nstitution were safe since they were assumed by Beverly Hills Federal, Alexander said.

The Federal Savings & Loan Insurance Corp. gave Beverly Hills Federal $90 million in promissory notes to assure its solvency. The FSLIC could get some of that money back if the new institution is sold.

The seizure came a week after Beverly Hills Savings, which lost $7.4 million in 1983, projected that its deficit for last year would be $100 million, primarily because of bad real estate loans. The company had lost $9.3 million in the first nine months of last year.

Only hours before the thrift’s seizure, Amir and the board of Beverly Hills Savings filed a $100 million suit against the company’s previous management and its outside auditor, Touche Ross.

The suit contended that the company’s previous chairman, Dennis M. Fitzpatrick, and five other officers and directors violated their fiduciary duty and diverted corporate assets during ″a four-year financial joyride.″

The suit alleged that the previous managment made deals without regard for their actual value and that some of the deals were based on personal friendships between company officials and outsiders.

Fitzpatrick, who now heads the Los Angeles realty firm of Dennis Fitzpatrick & Associates, denied that the institution’s problems were caused during his tenure.

″Our entire portfolio was appraised at the end of 1983 and showed a value far in excess of book value,″ Fitzpatrick said. ″I believe the rapid deterioration can only have been caused by the Amir management not supervising the portfolio and taking appropriate action.″

He termed the suit’s allegations ″nonsense and totally without merit.″

In announcing seizure of the thrift, bank board spokeswoman Lorna Thompson said ″the new management (headed by Amir) inherited problems from the former management and was unable to improve the situation substantially.″

The bank board attributed the thrift’s failure to too-rapid growth and heavy reliance on brokered deposits - funds arranged by brokers and for which institutions pay premium interest rates.

Brokered deposits have come under increasing attack by bank and S&L regulators, who say institutions that seek such funds often are on shaky financial ground.

The thrift’s assets ballooned from $834 million at the end of 1982 to $2.94 billion last December. It had about $2.3 billion in deposits, and the proportion of those coming from brokered funds varied between 40 percent and 50 percent, the bank board said.

Amir said it wasn’t until his management team was in place last June ″that we began to uncover the mess created by bad loans, real estate appraised at far above its actual value and lousy joint ventures.″

He described his company’s problems as being at least as bad as those suffered by American Savings & Loan Association, the nation’s largest thrift and the chief subsidiary of Financial Corp. of America. Earlier this month, FCA posted a 1984 loss of $590.5 million, primarily because of troubled loans and real estate deals arranged by the company’s previous management.

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