EDERAL HOME LOAN BANK BOARD CRIMINAL REFERRAL FORM (FHLBB 366) FHLBB DOCKET NUMBER OF THE and also a CenTrust director. The beneficiaries of the SERP are a small group of the most senior executives of CenTrust, with Chairman Paul receiving by far the majority of the benefits. During the examination, Paul continually represented to the examiners that the true value of Integrated debt was far greater than the value represented by the market price due to a lot of intangible assets and other unrecognized worth. This would have been represented to the board of directors (including Davies and Moser) at board meetings as Paul fought the regulators over the amount of writedown required on the $39 million. Thus, it appears that the SERP purchased the $3.0 million in Integrated debt at the deeply discounted price of 3.25€ feeling that it would in time reach a much higher value; any increase in price from 3.25% would greatly benefit the handful of SERP beneficiaries even as CenTrust Bank was incurring losses of approximately $37-38 million on its Integrated debt. Adding further to the allegations that these individuals conducted these transactions with knowledge that they were improper is the fact that the examiners attempted for months to get accounting records for the SERP from England, but were refused access to those records by CenTrust management. Finally, said records were slowly made available in December 1989 and January 1990 following the issuance of a Temporary Cease and Desist Order by the Office of Thrift Supervision which required production of the records. At that time the examiners discovered the purchases of Integrated by the SERP. If it is determined that such transactions are in some way not insider trading in violation of securities laws, certain CenTrust officers nevertheless made false statements to Federal and state examiners. 2. rther recommended action would be a judgment by the SEC as to whether the itions as described would, in fact, constitute violations of securities laws. Indicate whether the suspected violation appears to be an isolated incident or whether it relates to other transactions. (Explain) Isolated. 3. 4. Exclusion of Information from the Referral: 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 [] No N/A Witnesses: List any witnesses who might have information about the suspected violation and describe their position or employment. Indicate whether they have been interviewed. Name: Possibly employees of the Dinam company in London, England. Position: (address available on attachments) Address: Possibly CenTrust Senior EVP Angel Cortina, since was REV: June 1988 Page No. 2. 3. Docket Number: 33745 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: Various (Month) (Day) (Year) Amount: S Unknown 4. Summary characterization of the suspected violation. Mark appropriate box(es) with an X. [ ] Defalcation/Embezzlement [ ] Bribery/Gratuity [ ] Bank Secrecy Act/ [X] False Statement [ ] Check Kiting [ ] Bank Fraud [ ] Misuse of Position Money Laundering S. Has there been any admission or a confession? funds. 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 OFFICE OF TARIFT SUPERVISION CRIMINAL REFERRAL FORM (OTS 366) transaction.) OTS DOCKET NUMBER OF THE The institution has formed a Political Action Committee (PAC) Subsidiary to contribute to political campaigns. Enoicyees and Officers are strongly encouraged to contribute to this PAC. 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. This may be in violation of Titie 13 of the United States Criminal Code, sections 657 and 1006, as well as in violation of the Federal Election Campaign Act under Title I of the United States Criminal Code, section 44lb. The Title 18 statutes are snown below: Title 18 U.3.0. sec. 557 - Theft, embezzlement or willful Title 18 U.S.C. Aec. 1006 - False entries and reports or statements. Summarizations of several interviews with former officers are attached which ascument these allegations. d. Relationship to the financial institution. Mark all applicable box(es): e. Is person still affiliated with the financial institution? [X] Yes [ ] No INSTITUTION: "52745 SECTION 8 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. See Section A.6. and attached summaries of interviews of former officers of CenTrust. Indicate whether the suspected violation appears to be an isolated incident or whether it relates to other transactions. (Explain) It is likely that similar incidents exist at the institution. 3. 4. Exclusion of Information from the Referral: Has any pertinent information been excluded from this referral as a result of any legal or other restraint? [ ] Yes [X] No If yes, why? N/A Have the excluded information and/or documents been segregated for later retrieval? [ ] Yes [ ] No N/A Witnesses: List any witnesses who might have information about the suspected violation and describe their position or employment. Indicate whether they have been interviewed. INSTITUTION: 0745 Position: Address: Phone No: Bus. address: Bus. phone: Please contact the individuals noted S. Discovery and Reporting a. Who discovered the suspected violation and when? The suspected violation(s) were discovered during the May 31, 1989 b. Has the suspected violation been reported to the Board of Directors? [ ] Yes [X] No c. Has the Board of Directors taken action? [ ] Yes [X] No. If so, what and when? The Board has not been notified d. Has the suspected violation previously been reported to federal or local law enforcement authorities or to any federal or state supervisory agency? [ ] Yes [X] No 7. Has the suspected violation had a material impact on or otherwise affected the financial soundness of the institution? [X] Yes [ ] No If yes, please explain. If the institution is found to be guilty of any criminal wrongdoing, and REV: June 1988 Page No. 6 |