Page 5 The suit also named board member Barl Linch, a Chicago construction contractor. The suit alleged Linch's firm, M. Ecker & Co., received over $3.4 million for construction work on the ConTrust Tower in Miami. Paul, Snyderman and Linch could not be reached for comment. The 57-page complaint catalogues the dozens of ways in which Paul allegedly used CenTrust as a personal piggy bank without questions from the directors. During 1988, despite CenTrust's deteriorating financial condition, the suit said the board authorized Paul's purchase of $29 million of artwork that was later sold at a substantial loss. One of the paintings, Peter Paul Rubens' "Portrait of Man as Mars, hung in Paul's La Gorce Circle home in Miami Beach. The house was purchased with $6.1 million in Centrust loans and later valued at much less. The suit charged Paul with a $750,000 spending spree to outfit Centrust's executive dining room with Limoges china, 240 sets of Baccarat crystal, Ercuis tableware, Christofle service carts and French Porthault linens. He also spent $1 million on a spiral staircase, gold leaf ceilings, hand-carved mahogany windows and executive bathrooms with gold-plated sinks. The suit charged that the bank paid $515,000 for premiums on a $6 million life insurance policy that named Paul's wife, not the bank, as the beneficiary. The suit charged the directors with approving $11 million in dividends on Paul's stock between 1985 and 1988, including $3.2 million in 1988, "despite ConTrust' failure to generate positive operating results. The board ceased approving dividends "only after being prohibited by the regulators from doing so, the suit said. The suit accused Paul and the board of diverting more than $5 million into a supplementary executive retirement plan to provide additional compensation to Paul. The suit said the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison received $7 million in legal fees to set up the plan. Other directors named in the suit included Barry K. Schwartz, chairman of Calvin Klein Industries Inc., who also owned a substantial interest in Minnetonka Inc. of Bloomington, Minn., a cosmetics company. Schwarts personally benefited from Centrust's purchase of 200,000 shares of Minnetonka stock for nearly $3 million in January, 1989. The suit comes a month after the Office of Thrift Supervision sued David Paul as an individual to recover $12 million spent on yachts, homes and expensive household furnishings. Sources close to the case said the government is continuing to investigate possible lawsuits against professionals who did work for Centrust, including law firms like Paul Weiss and the accounting firm of Deloitte Touche. The directors sued on Friday may have to defend themslves. On Oct. 30, Federal District Court Judge Federico Moreno ruled in Miami that the $12 million legal defense fund set up by Paul for the directors was an illegal diversion of funds and had to be returned to the RTC. LEXIS NEXIS LEXIS NEXIS LEXISNEXIS HEADLINE: $31 MILLION SOUGHT FROM CENTRUST'S EX-CHIEP; S&LS: REGULATORS ACT TO RECOVER FUNDS THEY SAY DAVID PAUL MISUSED AT THE FAILED BYLINE: BY ROBERT A. ROSENBLATT, TIMES STAFF WRITER DATELINE: WASHINGTON BODY Federal officials on Monday denounced the "insatiable vanity and greed" of former CenTrust Bank Chairman David L. Paul, whose executive bathroom at the Miami thrift had gold-plated sinks and pipes, and began action to force him to repay nearly $31 million to the failed institution. "The American taxpayers have every right to be outraged, Timothy Ryan, director of the Office of Thrift Supervision. said at a news conference. The OTS action is the third in a series of high-profile, big-money complaints by the agency in the aftermath of the insolvency of hundreds of SELE. The OTS moved earlier this year against Charles H. Keating Jr., the In Monday's action, the OTS said it would serve Paul who also was Centrust's chief executive with a cease-and-desist order barring him from selling or shifting any assets worth more than $5,000, and demanding the repayment of $30,879,500 to CenTrust, which is now under government control. LEXIS NEXIS LEXISNEXIS LEXIS NEXISO 1990 Los Angeles Times, October 23, 1990 Page 7 CenTrust once the nation's 23rd-largest thrift, failed and was seized by the government in February. The estimated cost to taxpayers of the collapse will be $1.7 billion, making the failure one of the nation's costliest. The requested restitution includes: $15 million in a special legal defense fund organized with CenTrust money for Paul and other directors. The OTS calls it a "slush fund comprised of CenTrust's most marketable securities." $4.9 million in a pension fund for Paul moved from the United States to a British bank. The money is being managed by Edward D. G. Davies, an important British financier and former CenTrust director. $4 million for the government's losses on the sale of ConTrust'e $393,000 in pay raises and bonuses in CenTrust's last and worst year, when the thrift lost $209 million. $100,000 to cover the government's loss on the sale of the yacht "Bodacious," which cost Centrust $233,000. • $35,000 for 24-karat gold leaf ceilings for Paul's private office and conference room in ConTrust headquarters. The marble staircase leading to Paul's office and the gold-plated sinks, faucets and toilet pipes in his private bathroom were extravagant outlays illustrating Paul's insatiable vanity and greed, paid for by an (S&L) insured by the federal government, said Faith Hochberg, senior deputy counsel at the OTS. "David Paul's extravagant lifestyle, in which he enriched himself at the ultimate expense of depositors and taxpayers, exceeds virtually anything this agency has encountered before, Hochberg said. The OTS filing was a surprise, according to Paul's attorney, Aubrey Harwell of Nashville. "I "I haven't been served with this $30-million demand, Harwell said Monday. didn't know anything until the media called me. I am a bit surprised they chose to go to the press before communicating with me and Mr. Paul.. OTS officials said Paul has until Nov. 1 to pay the $30 million or post a bond. If he ignores the administrative complaint, regulators said, they will go into federal court to force him to obey the order. If Paul contends that he cannot pay the money, he must file sworn financial statements, the regulators said. Officials are uncertain of Paul's whereabouts. There are rumors that he has left the country. LEXIS NEXIS LEXIS NEXIS LEXIS NEXIS Services of Mead Data Central, Inc. 1990 Los Angeles Times, October 23, 1990 Page 8 "I can't tell you where he is, the OTS Hochberg said. "We believe he still has a residence in Miami. He has been seen many times recently." The order can be officially served by being sent to Paul's Miami home and to his lawyer, according to Harris Weinstein, the OTS chief counsel. The OTS complaint accused Paul of reckless disregard for the law and regulations and engaging in unsafe and unsound financial practices. OTS officials also are investigating reports that Paul sent millions of dollars overseas for personal speculation in stocks and commodities. OTS actions against Paul, Keating and Spiegel demonstrate that "the days of high living at taxpayer expense have ended, Weinstein said. The agency hopes to "regain every cent possible from those responsible for the S&L "debacle, he said. After the failure of Centrust. Beverly Hills-based Great Western Financial Corp. purchased its deposits, branch operations and some assets. Centrust had $8.2 billion in assets. HEADLINE: New accusations surfacing against CenTrust's ex-cheif BYLINE: DAVID DAHL DATELINE: WASHINGTON BODY Federal thrift regulators have prepared 10 potential criminal cases for the FBI alleging that former Centrust Savings Bank chairman David Paul may have committed fraud, securities violations and bribery. The regulators documents called criminal referrals provide new details of accusations that Paul allegedly spent Centrust money to bribe the mayor of LEXIS NEXIS LEXIS NEXIS LEXIS NEXIS Services of Mead Data Central Ins Miami Beach, to buy Oriental rugs and a sailboat and to renovate his In strongly worded explanations of the documents, regulators with the Office of Thrift Supervision said Paul spent millions of dollars from the Miami - based S&L as if the money were his own. Bailing out Centrust which was seized by the government in February may cost taxpayers $ 2-billion. "This misuse of position and corporate funds is only one example of a pattern of abusive activities by Mr. Paul in which he uses Centrust assets for his personal use, the thrift regulators said in outlining one of the cases in December. 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 "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." ConTrust's Already, Paul's flamboyance marked by his artwork, yacht and 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 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. |