statements could be construed as an apparent a::emo: :: :ce :re purchase. Past, Mr. Faul stated that the ownership of the boat c:d not fit well with the image of the Bank in the new ers of the industry and in light of the Busn

2. Indicate whether the suspected violation appears to be an isolated incident or whether it relates to other transactions. (Explain)

3.

This activity is similar to many others at the Bank. As disclosed in the May 31, 1989 examination report, Mr. Paul has demonstrated a lack of regard for complying with laws and regulations, and acts in a manner that will benefit himself. It is likely that numerous other transactions Similar to the above exist at the institution. See related 366 filings submitted as of this date.

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

List any witnesses who might have information about the suspected violation and describe their position or employment. Indicate whether they have been interviewed.

Name:

Position:

Address:

Phone No:

Bus. address:

Bus. phone:
Interviewed:

Please contact the individuals noted
in Section A, Item 9 of this form for
specific information on witnesses.

S.

Discovery and Reporting

a. Who discovered the suspected violation and when?

The suspected violation(s) were discovered during the May 31, 1989
examination conducted by the Office of Thrift Supervision, Atlanta
District (f/k/a Federal Home Loan Bank of Atlanta) and the State of
Florida, Office of the Comptroller, Division of Banking.

b. Has the suspected violation been reported to the Board of Directors? [ ] Yes [X] No

If activity occurred at branch office(s), identify:
Activity occured at Main Office as detailed below.

3.

38,961,146,000 (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

4.

(Month) (Day) (Year)

Summary characterization of the suspected violation. Mark appropriate box(es) with an X.

[ ] Defalcation/Embezzlement [ ] Bribery/Gratuity

[X] False Statement

[ ] Check Kiting

[ ] Bank Fraud

Bank Secrecy Act/

5.

Has there been any admission or a confession?
[X] Yes [ ] No If so, by whom? David L. Paul

REV: June 1988

Page No. 1

6.

OTS DOCKET NUMBER OF THE
FINANCIAL INSTITUTION: 82745

Explanation/Description of Suspected Violation (Give a brief summary of the suspected violation, explaining what is unusual or irregular about the transaction.)

David L. Paul, Chairman and Chief Executive Officer of CenTrust Bank,
a State Savings Bank (CenTrust) is suspected of tax evasion/avoidance
in connection with CenTrust's purchase of four (4) Persian rugs in
1986 and 1987. (These purchases are shown in Section A.3 of this
form). Mr: Paul attempted to conceal this transaction(s) from
federal examiners. This tax avoidance may constitute a violation of
Title 18 of the United States Criminal Code, section 1006. A summary
of this statute is shown below:

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 or deceive an Office of Thrift Supervision
examinert receipt of any benefits by an officer, agent or employee of
the institution from a transaction of the institution with intent to
defraud by the individual.

d. Relationship to the financial institution. Mark all applicable box(es):

e. Is person still affiliated with the financial institution? [X] Yes [ 1 No

f. Prior or related referrals? [X] Yes [ 1 No If yes, please identify:

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.

In 1986 and 1987 CenTrust purchased four (4) Oriental/Persian rugs for $208,000 (see section A.3 of this form for specific dates and amounts) from Habib Oriental Rugs, Miami, Florida. These purchases were discovered in mid 1987 when an anonymous informant informed the Office of Thrift Supervision (f/k/a the Federal Home Loan Bank of Atlanta) that Mr. Paul had CenTrust purchase these rugs, but worked out a plan which showed the rugs being delivered to CenTrust Savings Bank at a New Milford, Connecticut address. The address shown was that of Mr. Paul's second home.

In a February 13, 1987 letter from Mr. Paul (with regard to the three rugs that had been purchased by this date), he stated that although the invoices showed the rugs being shipped to his Connecticut residence, they were delivered directly to CenTrust in Miami, Florida. Mr. Paul said that the Connecticut address was used at the suggestion of the seller as that would enable the seller not to charge CenTrust Florida sales tax.

During the examiner's review, Mr. Paul attempted to mislead the examiners with incomplete and inaccurate information. For example, he first claimed that the rugs had been maintained in a Miami warehouse while awaiting completion of the CenTrust Tower construction. It was only after repeated questioning by the

OFFICE OF THRIFT SUPERVISION

CRIMINAL REFERRAL FORM (OTS 366)

OTS DOCKET NUMBER OF THE
FINANCIAL INSTITUTION: 02745

examiners, based on subsequent information learned, that Mr. Paul admitted that some of the rugs had, in fact, been delivered and maintained at his Miami Beach residence for a period of time.

In view of the information above, it is concluded that David Paul conspired with the seller of the rugs to "fix" invoices so that CenTrust could avoid/evade State sales tax. Additionally, he made false and misleading statements to cover up this fact as well as the fact that CenTrust assets were being maintained at his personal residence.

2. Indicate whether the suspected violation appears to be an isolated incident or whether it relates to other transactions. (Explain)

This activity is similar to many others at the bank. As disclosed in the January 11, 1988 and May 31, 1989 examination reports, Mr. Paul repeatedly demonstrates a lack of regard in complying with laws and regulations, and acts in a manner that will benefit himself personally (either a financial benefit or a benefit to his reputation at the expense of the institution). It is likely that numerous other transactions similar to the above exist. See related 366 filings submitted as of this date.

3. Exclusion of Information from the Referral:

4.

Has any pertinent information been excluded from this referral as a result N/A 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:
Position:
Address:

Phone No:

Bus. address:

Bus. phone:
Interviewed:

Please contact the individuals noted
in Section A, Item 9 of this form for
specific information on witnesses.

S.

REVI

Discovery and Reporting

a. Who discovered the suspected violation and when?

The suspected violation(s) were discovered during 1987 and were the