The regulators' documents-called crimi- Less landfill use ■The amount of waste being recycled has nearly doubled in the last 30 years, according to the EPA. to bribe the mayor of Miami Beach, to buy Oriental rugs and a sailboat and to renovate his multimillion-dollar house. In strongly worded explanations of the doc- "This misuse of position and corporate Please see CENTRUST 6A Conciliation Former CenTrust Soviet President Mikhail Gorbachev, right, reaches to shake hands with political rival and Russian on his reforms by cr They added that Paul's "pattern of self dealings for personal benefit has contributed to CenTrust's deteriorated financial condition." The regulators' investigative documents are believed to have been sent to the FBI and U.S. Attorney's Office in Miami at the beginning of the year. They are merely a first step in a process that may or may not lead authorities to pursue criminal charges. They are not an indication of guilt, and no charges have been filed against Paul. Paul denies any wrongdoing. His attorney said the case against the former CenTrust chairman appeared flimsy. "If that's what they're looking at to possibly indict him, I'm a little relieved," said Sanford Bohrer, Paul's attorney. "I keep waiting for them to come up with some serious stuff." Already, Paul's flamboyance -marked by his artwork, yacht and CenTrust's 47-story office tower-are a well-known chapter in the story of the high-flying S&L executives involved in the huge thrift scandal. The entire bailout could cost taxpayers as much as $500-billion over the next 30 years. Many executives of failed thrifts have not been charged, however, and members of Congress are now calling for a special prosecutor to investigate the thrift scandal. As of February, lawmakers say, the Justice Department had a backlog of 21,000 referrals of possible wrongdoing in financial institutions. The St. Petersburg Times reviewed copies of 10 CenTrust referrals and also reviewed a 1989 regulator's examination that provided the government with evidence to seize CenTrust. The 10 accusations, incinde a few cases that already have been publicised, but they do not include one of the more notorious allega tions that Paul used CenTrust money to buy $29-million in artwork displayed in his home. Federal officials with the U.S. Attorney's Office, FBI and Office of Thrift Supervision declined to disclose if the art case or others had been referred. They also refused to elaborate on the allegations in the other 10 referrals. The accusations say thate Paul is suspected of illegally "parking" $25-million in securities in the Bank of Credit and Commerce International (BCCI). In an unrelated case this year, BCCI pleaded guilty in Tampa to laundering cocaine profits. BCCI helped out CenTrust when the thrift was unable to sell all of the $150-million in high-risk securities it issued in May 1988, regulators say. BCCI agreed to buy $25-million in CenTrust securities, regulators say, so that other investors wouldn't be worried about CenTrust's financial health. Some CenTrust extravagances When regulators reviewed CenTrust's books last year, they reported finding thousands of dollars worth of extravagances that thrift chairman David Paul billed to the S&L or its affiliates. CenTrust purchases that federal regulators listed in a 1989 examination report include: $150.088 in CenTrust assets that were kept at Paul's home. The merchandise included a dehumidifier, a deep fryer and mobile telephones. $35,662 from Tiffany and Co. for such items as engraved calling cards, matches, a $278 baby gift for an executive of Drexel Burnham Lambert and $434 for a wedding gift to Miami Beach Mayor Alex Daoud. $20.952 for linens from a Paris vendor. $33.988 in limousine service from February 1987 to Janu buy Daoud's "favorable consideration" of a zoning variance. The payments were allegedly made in 1988 and 1989. Paul needed a permit to build a huge teak dock for his 90-foot yacht outside his Miami Beach home. Daoud ended up supporting the dock, though he denies he did so because of the CenTrust fee. If the accusation is true, "the payments take the form of a gratuity paid Mr. Daoud and are considered a misapplication of bank funds by Mr. Paul for his own personal gain," the regulators wrote. The accusation is bolstered by a statement that Roland Baker, the former head of CenTrust's insurance subsidiary, made to the regulators. Baker told regulators that Paul ordered him to pay Daoud, but that he initially refused be cause he thought the fee was unusual. "Mr. Paul then called personal ly and demanded it be taken care of right away or jobs would be terminated. Mr. Baker then complied," according to an account of Baker's interview. Paul had a CenTrust subsidiary pay $54,736 to cover the insurance on his yacht, called the Grand Cru, and for credit-card bills and moving expenses of the yacht's captain. In addition, he is accused of spending the subsidiary's money to pay the salaries of yacht crew members. Paul has partly reimbursed the subsidiary, regulators reported. Paul's employees were "strongly encouraged" to contribute to CenTrust political action committees (PACs) that gave cam paign money to members of Congress, Florida state Comptroller Gerald Lewis and others.. "In fact, several former officers have alleged that participation in the PAC is directly or indirectly a requirement for continued employment, high salaries and bonuses," the regulators' document paigns in the 1980s. Several politicians also were entertained by Paul on his yacht or given the use of his jet. For example, Lewis, Florida's chief banking regulator, once attended a party in his honor at Paul's home, according to a statement Florida banker T. J. "Ted" Hoepner gave the regulators. "He (Hoepner) said Lewis appeared nervous and said, 'Should I be here?' Hoepner said he jokingly. replied, 'Should I be here," the regulators reported. Lewis has since taken action against CenTrust, accusing Paul of operating the thrift as if it were Paul's "own personal piggy bank." At Paul's direction, a CenTrust subsidiary spent $232,355 for a 40-foot sailboat called the Bodacious in 1989. The regulators called the expenditure a misuse of corporate money and claimed Paul tried to hide the purchase from examiners. Paul has denied wrongdoing in this instance, though he conceded the boat was purchased to entertain clients. Paul used CenTrust money and workers to do extensive renovations on his $8.6-million Miami Beach home, according to former CenTrust officers. The regulators reported that the officers told them Paul "was diverting funds from the construction of ČenTrust Towers to fund the major renovations (at his home). "The former officers stated that Mr. Paul often bragged of his successful acquisition of the institution and his personal yacht at no personal cost," the regulators' statement says. The regulators say that the expenditures were intentionally concealed from bank examiners in the mid- to late 1980s. CenTrust bought $208,000 in Oriental rugs that regulators allege were used in Paul's home. He also was given 20 cases of Baccarat crystal from the CenTrust-financed Stanhope Hotel in New York City after the hotel filed for bankruptcy, they reported. CenTrust repurchased the se- Inventory of stolen art ordered curities for $25-million two months later. "It is highly likely that this transaction was consummated only to preserve investor perceptions of CenTrust's ability to sell the entire €150 millian issue" the remula. Ask ab protec for Ha dry-cle loose! 2714 This acuti sun the case aguuist the former CenTrust chairman appeared imsy. "If that's what they're looking at to possibly indict him, I'm a little relieved," said Sanford Bohrer, Paul's attorney. "I keep waiting for them to come up with some serious stuff." Already, Paul's flamboyance -marked by his artwork, yacht and CenTrust's 47-story office tower are a well-known chapter in the story of the high-flying S&L executives involved in the huge thrift scandal. The entire bailout could cost taxpayers as much as $500-billion over the next 30 years. Many executives of failed thrifts have not been charged, however, and members of Congress are now calling for a special prosecutor to investigate the thrift scandal. As of February, lawmak ers say, the Justice Department had a backlog of 21,000 referrals of possible wrongdoing in financial institutions. The St. Petersburg Times reviewed copies of 10 CenTrust referrals and also reviewed a 1989 regulator's examination that provided the government with evidence to seize CenTrust. The 10 accusations include a few cases that already have been publicized, but they do not include one of the more notorious allegations that Paul used CenTrust money to buy $29-million in artwork displayed in his home. Federal officials with the U.S. Attorney's Office, FBI and Office of Thrift Supervision declined to disclose if the art case or others had been referred. They also refused to elaborate on the allegations in the other 10 referrals. The accusations say that: Paul is suspected of illegally "parking" $25-million in securities in the Bank of Credit and Commerce International (BCCD): In an unrelated case this year, BCCI pleaded guilty in Tampa to laundering cocaine profits. BCCI helped out CenTrust when the thrift was unable to sell all of the $150-million in high-risk securities it issued in May 1988, regulators say. BCCI agreed to buy $25-million in CenTrust securities, regulators say, so that other investors wouldn't be worried about CenTrust's financial health. CenTrust repurchased the securities for $25-million two months later. "It is highly likely that this transaction was consummated only to preserve investor perceptions of CenTrust's ability to sell the entire $150-million issue," the regulators wrote in their document to the FBI. The transaction has another player: Ghaith Pharaon, who owned 28 percent of CenTrust stock and an interest in the stock brokerage firm that handled the deal and reportedly has had a financial interest in BCCI as well. Regulators say this transaction constituted a conflict of interest. They also say CenTrust failed to disclose it in reports to the government. Paul has denied that it was a conflict of interest, according to the Miami Herald. . C O CenTrust and an affiliate paid Miami Beach Mayor Alex Daoud a $35,000 legal fee that the regulators suspect was intended to cut. $147,288 for the thrift's 1988 annual meeting in Connect buy Daoud's "favorable consider Paul needed a permit to build a If the accusation is true, "the payments take the form of a gratuity paid Mr. Daoud and are considered a misapplication of bank funds by Mr. Paul for his own personal gain," the regulators wrote. The accusation is bolstered by a statement that Roland Baker, the former head of CenTrust's insurance subsidiary, made to the regu lators. Baker told regulators that Paul ordered him to pay Daoud, but that he initially refused because he thought the fee was unusual. "Mr. Paul then called personal ly and demanded it be taken care of right away or jobs would be terminated. Mr. Baker then complied," according to an account of Baker's interview. Paul had a CenTrust subsidiary pay $54,736 to cover the insurance on his yacht, called the Grand Cru, and for credit-card bills and moving expenses of the yacht's captain. In addition, he is accused of spending the subsidiary's money to pay the salaries of yacht crew members. Paul has partly reimbursed the subsidiary, regulators reported. Paul's employees were "strongly encouraged" to contrib ute to CenTrust political action committees (PAC) that gave cam pain money to members of Congreat Florida state Comptroller is and others. "In fact, several former officers have alleged that participation in the PAC is directly or indirectly a requirement for continued employment, high salaries and bonuses," the regulators' document says. The House Banking Committee found earlier this year that CenTrust, its PAC and CenTrust employees gave $328,528 to cam paigns in the 1980s. Several politi- For example, Lewis, Florida's "He (Hoepner) said Lewis appeared nervous and said, 'Should I be here?' Hoepner said he jokingly replied, 'Should I be here," the regulators reported. Lewis has since taken action against CenTrust, accusing Paul of operating the thrift as if it were Paul's "own personal piggy bank." At Paul's direction, a CenTrust subsidiary spent $232,355 for a 40-foot sailboat called the Bodacious in 1989. The regulators called the expenditure a misuse of corporate money and claimed Paul tried to hide the purchase from examiners. Paul has denied wrongdoing in this instance, though he conceded the boat was purchased to entertain clients. Paul used CenTrust money and workers to do extensive renovations on his $8.6-million Miami Beach home, according to former CenTrust officers. The regulators reported that the officers told them Paul "was diverting funds from the construction of CenTrust Towers to fund the major renovations (at his home). "The former officers stated that Mr. Paul often bragged of his successful acquisition of the institution and his personal yacht at no personal cost," the regulators' statement says. The regulators say that the expenditures were intentionally concealed from bank examiners in the mid- to late 1980s. CenTrust bought $208,000 in Oriental rugs that regulators allege were need in Paul's home. He also was given 20 cases of Baccarat crystal from the CenTrust-financed Stanhope Hotel in New York City after the hotel filed for bankruptcy, they reported. Inventory of stolen art ordered Associated Press DALLAS-A federal judge on Tuesday ordered the bank that has been holding a cache of stolen medieval art to open its vault for inventory by the East German cathedral that claims the treasure. U.S. District Judge Sidney A. Fitzwater also ordered that the time and place of the inspection be kept secret to protect the inspectors and the objects. The art is believed to have been stolen from a German mine shaft at the end of World War II by a U.S. soldier from Texas. The president of a First National Bank branch in the town of Whitewright said he never knew The Lutheran cathedral in Meador died in 1980, and his family put the objects in the bank for safekeeping, said branch President John Farley. He said the bank will ask to be dropped from the lawsuit because First National never claimed to own the relics. We mean business. For guaranteed home delivery Call 895-1181 St. Petersburg Times $39 $79 Carpet: Our 2-ste ground-i processe about ou retardan Stairs no Combine and roor feet are c rooms. T $49 Cleans! During t clean and upholste designec soil and ! colorsof quality Ask abou protectio for Haitia dry-clean loose bac In Hillsbo call 228County, c all other 1-800-44 Charge it Small tra added to Ryan, John E., district director, Atlanta Office of Thrift Supervision, accom- APPENDIX Ryan, John E., and Maria I. Richmond with attachments 94 69 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD CenTrust political contributions ......... 324 CenTrust Savings Bank, assets composition, 1983 v. 1989 150 149 Documentation provided to the committee by State and Federal regulators and submitted for the record by Chairman Gonzalez. 160 Financial statements of CenTrust Bank from form 10-K, prepared by Price 328 Index of documents provided to the committee by the Office of Thrift Supervision........... 370 Index to CenTrust photographs........ 381 Letter dated March 20, 1990, from counsel to David L. Paul to Chairman 138 Letters of invitation to witnesses.... 128 National Thrift and Mortgage News article dated January 29, 1990: "OTS Contacts with elected officials, submitted for the record by Mr. Wylie 318 153 Photograph and information on David Paul's yacht, Grand Cru ...... 155 145 Thrift Liquidation Alert article: "Junk Heap Poses Liquidation Challenge 159 156 (III) |