The government`s savings and loan bailout agency filed suit in federal court Wednesday to recover $51 million it alleges was lost through negligence and mismanagement by 13 former directors and officers of the failed Concordia Federal Bank for Savings of south suburban Lansing.
The complaint charges that former Chairman Gary K. Kummer and the 12 others allowed the suburban thrift to make ill-advised loans around the country and set up a California mortgage banking subsidiary that ran amok.
The Resolution Trust Corp., which filed the suit, estimated in 1990 that Concordia`s failure would ultimately cost taxpayers $89.8 million.
The thrift financed Texas condominiums, housing for a Utah ski area with ski lifts that were never completed and rental apartments on the edge of a Florida swamp, said James Richter, a former president of the thrift who was not named in the suit. Richter was recruited eight months before the S&L collapsed in February 1989.
The institution embarked on the out-of-state lending though the staff did not have the experience or expertise to evaluate the deals, the suit alleges. By 1984, when regulators ordered a halt to out-of-state lending, 14 of 23 such loans had soured at a cost of more than $30 million, according to the suit.
Concordia then set up an independent subsidiary in California to grant and resell mortgages. Officers in that company were paid ”excessive salaries” tied to mortgages they granted, and the ”rapid growth” in the subsidiary ”overwhelmed management,” according to the complaint.
The subsidiary, Concor Financial Services, kept large portfolios of mortgages on its books, exposing it to losses from interest rate swings, Richter said.
Concor had cost the thrift more than $13 million by the time regulators shut it down in 1988.
The RTC has filed suit in California against two Concor officers who allegedly paid themselves $1.5 million while running the operation.
The suit also seeks to recover more than $8 million lost on the S&L`s speculation in long-term government bonds and mortgage-backed securities. The instruments are risky because their values are highly sensitive to changes in interest rates.
The suit does not specify damages, but RTC spokeswoman Jane Jankowski said: ”At this point, we`re looking for the full $51 million.”
Kummer is not listed in Chicago-area telephone directories and could not be reached Wednesday.
In addition to Kummer, the suit names John W. Gilluly, chairman of Concordia from 1966 to 1982.
Other defendants are Francis X. Gallagher, Vincent J. Gavin, John J. Gill, Gordon A. Groebe, Joseph M. Heidecker, Lawrence Klinger, Louis J. Kole, Matthew J. Lamb, H. Richard Landis, Edward A. Long and Milton Meyers. All were officers or directors of Concordia or Concor, according to the suits.