[clari.biz.finance.services] Government seizes CenTrust Bank

clarinews@clarinet.com (VINCENT DEL GIUDICE, UPI Business Writer) (02/03/90)

	WASHINGTON (UPI) -- Federal and state banking authorities seized
control Friday of battered CenTrust Bank of Miami and placed the
Southeast's largest savings institution under conservatorship, the
government said.
	The latest regulatory action against ailing Centrust ``in no way
affects depositors''' access to their money, said Tom Mason, a spokesman
for the Office of Thrift Supervision.
	Embattled Centrust chairman David Paul, reported to be the target
of a government investigation, ``was relieved of management
responsibility'' and replaced by Kurt Wierschem, he said.
	``We took it down basically because it was in an unsafe or unsound
condition to transact business and had grave capital and other financial
problems,'' Mason said, adding the Florida's comptroller office took
part in the action.
	On Dec. 20, state officials moved to oust Paul, saying he
``maintained an opulent lifestyle largely at the expense of the
association, and generally treated a federally insured institution and
public company as if it were his own personal piggy bank.''
	A man who answered a telephone at Paul's home in Miami Beach said
the executive had no comment.
	The $8.2 billion institution -- the largest thrift in the
southeastern United States and the 23rd-largest in the nation -- will be
managed by the Resolution Trust Corporation under the federal
conservatorship program, he said.
	``Despite our best efforts at correcting the problems we've found
at CenTrust, we've come to the conclusion that today's action is
necessary to preserve the assets of the institution and protect
depositors and ultimately taxpayers,'' state Comptroller Gerald Lewis
said. ``From a depositor's standpoint, it will be business as usual at
	Regulators also assumed control Friday of troubled Pioneer Savings
Bank, of Clearwater, Fla., one of the state's largest thifts with $2
billion in assets. In 1988, Pioneer and CenTrust contemplated a merger
but later nixed the deal, saying it was unworkable.
	In Tampa, Fla., state regulators late Friday closed the insolvent
Commerce Bank of Tampa and federal regulators approved its purchase by
Southern Exchange Bank of Tampa. The FDIC said Southern Exchange will
assume about $22.7 million in 2,800 deposit accounts and certain
liabilities of Commerce Bank.
	Paul gained control of CenTrust, formerly called Dade Savings and
Loan, in November 1983, when it was $500 million in the red and near
	He rebuilt the company's balance sheet and expanded the branch
network while paying high rates of interest to attract deposits and
using that money to buy higher paying, but often risky, junk bonds.
	Regulators have questioned in documents filed publicly at least $45
million in expenditures from CenTrust, including Paul's compensation and
allegedly inflated salaries for other CenTrust executives.
	Also included is nearly $5 million in a retirement plan for Paul
and other executives handled by a foreign company, and the purchase of
$29 million in Old Master paintings and other art displayed for a time
at Paul's home.
	CenTrust got back about $25 million by selling some of the art on
the orders of bank regulators.
	The thrift seizure Friday was the latest in a series of savings
institutions to be taken over by federal officials, who assured
CenTrust's customers that their accounts are safe and insured by the
	``The action in no way affects depositors ability to transact
business as usual during the thrifts normal hours of operations,'' Mason
	In addition to Wierschem, Charles Stumberger was appointed
CenTrust's new chief credit officer, and Stuart Rooney was appointed the
savings institutions new chief financial officer, Mason said.
	Earlier, regulators slapped CenTrust with a trading suspension
because of what they described as concerns over the thrift's financial
reporting. The trading suspension took effect Jan. 23, and expired
midnight Monday.
	The OTS said CenTrust would be insolvent if its financial reports
conformed to generally accepted accounting procedures.
	At the time CenTrust reacted angrily to the halt, saying the
suspension was part of a continuing effort by regulators to force it out
of business.
	CenTrust also said the accounting treatment urged by regulators is
neither required by generally accepted accounting principles, nor used
by most fniancial institutions.
	Embattled CenTrust was the subject of more adverse publicity last
week, when it was reported the Securities and Exchange Commission, IRS
and Justice Department were investigating regulators' allegations that
Paul misappropriated CenTrust assets.
	Reports also indicated the SEC is investigating business links
between CenTrust, junk bond king Michael Milken and Charles Keating Jr.,
the central figure in the $2.5 billion collapse of Lincoln Savings and
	Investigators reportedly suspect Milken and the thrifts of trading
about $1 billion in junk bonds among themselves to manipulate profits.