Bankruptcy Trustee Sues Agencies Over FCA Failure

A bankruptcy trustee for Financial Corp. of America in Irvine has sued several federal agencies and former FCA executives, claiming that they caused the company to lose more than $1 billion in the four years before its troubled American Savings & Loan unit was sold in 1988.

The trustee, David A. Gill, contends in the suit filed this week in federal court in Santa Ana that William J. Popejoy was installed as FCA chairman in 1984 by regulators and that he and nine others mismanaged the company and the thrift. The suit said the company was robbed of its assets by “fraudulent and preferential asset transfers.”

The transactions benefited regulators and American Savings at the expense of FCA because the regulatory agencies--by providing funds to American and insuring its deposits--were actual or potential creditors of American, the suit said. But regulators had no claims against FCA, the suit contends.

The suit also charges that “regulators were ill-equipped, and knew that they were ill-equipped, to manage American” and that they operated the institution in a “negligent manner.”

The suit alleges that the Federal Home Loan Bank Board, the Federal Savings and Loan Insurance Corp. and the Federal Deposit Insurance Corp.--with conflicts of interest as actual or potential creditors of American--wanted to transfer assets to the S&L; from FCA at less than fair value.

American Savings was sold in the last days of 1988 to the Robert M. Bass Group of Ft. Worth, which received more than $1 billion in government assistance to take over the then-insolvent institution. A new holding company based at FCA headquarters operates the now-successful thrift, renamed American Savings Bank. It is liquidating the bad assets from the old American Savings & Loan.

Popejoy, who works for Bass at the S&L;’s holding company, was unavailable for comment.