FEDERAL HOME LOAN BANK BOARD CRIMINAL REFERRAL FORM (FHLBB 366) FHLBB DOCKET NUMBER OF THE SECTION B TO BE COMPLETED IN REFERRAL CASES WHERE SUSPECTED CRIMINAL ACTIVITY INVOLVES PROBABLE LOSS (BEFORE REIMBURSEMENT OR RECOVERY) OF $10,000 OR GREATER OR IN ALL CASES, REGARDLESS OF AMOUNT, INVOLVING AN AFFILIATED PERSON WITHIN THE MEANING OF 12 C.F.R.§ 561.29. 1. Give a chronological and complete account of the suspected violation. (If necessary, use Continuation Sheet.) -Relate key events to document and attach copies of those documents. -Explain who benefited, financially or otherwise, from the transaction, how much and how. -Furnish any explanation of the transaction provided by the suspect and indicate to whom and when it was given. -Furnish any explanation of the transaction provided by any other person. -Furnish any evidence of cover-up by the suspect or evidence of an attempt to deceive federal or state examiners or others. - Indicate where the suspected violation took place(e.g. main office, branch, other). -Recommend any further investigation that might assist law enforcement authorities in fully examining the potential violation. In an interview (summary attached as Exhibit I) with Mr. Roland Baker, the former CEO of Old American Insurance Company (OAIC, a wholly-owned subsidiary of CenTrust Bank), Baker stated that he was ordered by CenTrust Chairman David Paul in mid-1988 to pay $5,000 to Alex Daoud, an attorney who is also Mayor of Miami Beach. Mr. Baker had ignored previous written instructions to make such payment since he, as CEO, knew of no reason why OAIC should be paying the money to Daoud. Mr. Paul then called personally and demanded it be taken care of right away or jobs would be terminated. Mr. Baker then complied. He stated that he had no knowledge that either Mr. Daoud or his firm were insurance specialists, and further questioned their use by OAIC, which is headquartered in Kansas City, Missouri. In an attempt to follow up on this, the examiners determined that no attorneys letter had been obtained by CenTrust from Daoud or his firm during the May 31, 1989 examination. (The bank is required to obtain such letters from all attorneys/firms doing legal work for the bank since the previous examination.) Upon repeated requests by the examiners, such attorneys letter was obtained and is included as Exhibit II. Also, numerous requests were made for a copy of any retainer agreement with Daoud or the firm. Finally, a copy of a brief and very general agreement dated May 19, 1988 (Exhibit III) was provided which was addressed to Roland Baker on "Galbut, Galbut & Menin" letterhead. Mr. Baker was obviously unaware of this document, which conceivably could have been produced after the fact based on the lengthy delay in obtaining it. Also obtained was an attorneys letter dated REV: June 1988 Page No. S FEDERAL HOME LOAN BANK BOARD CRIMINAL REFERRAL FORM (FHLBB 366) FHLBB DOCKET NUMBER OF THE October 17, 1989 stating services provided, most of which are unverifiable. A schedule of payments by both OAIC ($25,000 total) and later CenTrust Bank ($10,000 total) is attached as Exhibit IV. It is interesting to note that the two most recent $5,000 checks to Mr. Daoud in April and May 1989 (Exhibits V & VI, respectively) were: 1) paid by CenTrust and not OAIC, 2) made out to "Alex Daoud" and not the firm or even "Alex Daoud, Esquire" and 3) sent to Mr. Daoud's home address, not his business address. Mr. Baker noted in his discussion with the examiner that it was shortly after his being ordered to pay Mr. Daoud for unknown services that he (Baker) read in the paper about all of Chairman Paul's difficulties in getting variances approved for his yacht dock and saw where Mr. Daoud stood and spoke on Mr. Paul's behalf. Based upon the circumstances and Mr. Baker's representations, it is suspected that payments to Mr. Daoud may not have been for the purposes represented to the Federal regulators. 2. Indicate whether the suspected violation appears to be an isolated incident or whether it relates to other transactions. (Explain) While Mr. Paul has engaged in other suspected criminal activities for which referrals have been prepared, these transactions with Mr. Daoud appear to be isolated. J. Exclusion of Information from the Referral: 4. Has any pertinent information been excluded from this referral as a result of any legal or other restraint? [] Yes [x] No If yes, why? Have the excluded information and/or documents been segregated for later retrieval? [] Yes [] Bo N/A Vitnesses: List any witnesses who might have information about the suspected violation and describe their position or employment. Indicate whether they have been interviewed. 2. 3. 4. Docket Number: 32745 If activity occurred at branch office(s), identify: Asset Size of Financial Institution: $8,961,146,000 (as reported on the September 30, 1989 Thrift Financial Report). Approximate date and dollar amount (prior to any allowances for restitution or recovery) of suspected violation Date: 1983 to 1989 (Month) (Day) (Year) Amount: Unknown Summary characterization of the suspected violation. Mark appropriate box(es) with an X. 6. [ ] Yes [X] No If so, by whom? None Explanation/Description of Suspected Violation (Give a brief summary of the suspected violation, explaining what is unusual or irregular about the transaction.) Mr. David L. Paul, Chairman and Chief Executive Officer of CenTrust OFFICE OF THRIFT SUPERVISION CRIMINAL REFERRAL FORM (OTS 366) OTS DOCKET NUMBER OF THE Bank, a State Savings Bank (CenTrust is suspected of using corporate funds (deposits insured by the Federal Government through the Savings Association Insurance Fund (SAIF) f/k/a the FSLIC) and personnel to do extensive construction work and major renovations on his personal residence. This activity is considered to be a misuse of Mr. Paul's position, and a misapplication of corporate assets. If these allegations prove to be true, they may constitute violations of Title 18 of the United States Criminal Code, sections 657 and 1806. A summary of these statutes are reproduced below: Title 18 U.S.C. sec. 657 - Theft, embezzlement or willful Title 18 U.S.C. sec. 1006 - False entries and reports or statements, including material omissions, made with intent to injure or defraud an insured institution of deceive an Office of Thrift Supervision examineri receipt of any benefit by an officer, agent or employee of the institution from a transaction of the institution with intent to defraud by the individual. See Section 8, item of this criminal referral form for a more d. Relationship to the financial institution. Mark all applicable box(es): e. Is person still affiliated with the financial institution? [X] Yes [ 1 No TO BE COMPLETED IN REFERRAL CASES WHERE SUSPECTED CRIMINAL ACTIVITY INVOLVES PROBABLE LOSS BEFORE REIMBURSEMENT OR RECOVERY) OF $10,000 OR GREATER OR IN ALL CASES, REGARDLESS OF AMOUNT, INVOLVING AN AFFILIATED PERSON WITHIN THE MEANING OF 12 C.F.R.Sc 561.29. 1. Give a chronological and complete account of the suspected violation. (If necessary, use Continuation Sheet.) -Relate key events to document and attach copies of those documents. -Explain who benefited, financially or otherwise, from the transaction, how much and how. -Furnish any explanation of the transaction provided by the suspect and indicate to whom and when it was given. -Furnish any explanation of the transaction provided by any other person. -Furnish any evidence of cover-up by the suspect or evidence of an attempt to deceive federal or state examiners or others. -Indicate where the suspected violation took place(e.g. main office, branch, other). -Recommend any further investigation that might assist law enforcement authorities in fully examining the potential violation. Prior to Mr. Paul's November 1983 acquisition of CenTrust Savings Bank (CenTrust), f/k/a Dade Savings, the institution had begun initial construction of a 47 story office building to be used as its headquarters downtown Miami, FL. The Tower was substantially completed in 1988, and the institution was fully moved into the building in mid 1989. Concurrent with the purchase of CenTrust, Mr. Paul moved to Miami and Subsequently, Mr. Paul purchased three (3) adjoining properties (40, 44 & 46 La Gorce A March 1989 appraisal of Mr. Paul's entire complex determined a value (upon completion) of $8.6 million. This appraisal was found to be of poor quality and thus an independant reappraisal has been ordered by the Office of Thrift Supervision. CenTrust made loans to Mr. Paul totalling $6.1 million secured by his residences. In informal interviews with former Centrust employees, officers and directors, they allege that Mr. Paul was diverting funds from the construction of the CenTrust Tower to fund the major renovations and/or |