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 CenTrust.'' 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 collapse. 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 government. ``The action in no way affects depositors ability to transact business as usual during the thrifts normal hours of operations,'' Mason said. 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 Loan. Investigators reportedly suspect Milken and the thrifts of trading about $1 billion in junk bonds among themselves to manipulate profits.