Saturday, January 08, 2000
Home State ordeal almost over
15 years later, final payment will close case
BY DAN HORN
The Cincinnati Enquirer
Marvin Warner
|
The 15-year struggle to sell off the remains of Home State Savings Bank will end in the next few months, when more than $140 million is returned to the state of Ohio.
The liquidation — the largest of its kind in state history — is the final chapter in a saga that began with Home State's collapse in 1985.
“It's finally coming to a conclusion,” said Common Pleas Judge Richard Niehaus, who oversaw the liquidation process.
Attorneys from a Columbus law firm have spent years traveling the country and tracking the Cincinnati bank's assets on behalf of the state.
They say they will complete their work by the end of March and hand over the final payment to state officials.
The state gets the money because it funded a bailout in 1985 that went to the 70,000 Home State customers who otherwise would have lost their deposits.
|
KEY PLAYERS
|
• Marvin L. Warner: Former owner, Home State Savings Bank. A former ambassador to Switzerland, he was convicted in 1987 on nine counts arising from the Home State debacle. He served two years and four months of a 31/2-year prison sentence at Madison Correctional Institution near London, Ohio. He was released in 1993, and in 1995 was living near Ocala, Fla.
• Burton M. Bongard: Former president, Home State Savings Bank.Released from a New York halfway house in 1993, after serving a 31/2-year sentence at Chillicothe Correctional Institution and three years at a federal prison camp in McKean, Pa.
• David J. Schiebel: Former president, Home State Savings Bank. He served one month of a six-month prison sentence at Talbert House in Cincinnati in 1993.
• Ronnie Ewton: Co-founder, ESM Government Securities. Released in 1994 after serving five years at a prison camp at Eglin Air Force Base in Florida and five years of a state sentence at Chillicothe.
• Richard Celeste: Former Ohio Governor. Four days after ESM shut down, Home State collapsed and drained Ohio's private insurance deposit fund, forcing Gov. Celeste to close all state-chartered S&Ls for three days. He later became U.S. ambassador to India.
|
The bailout was necessary because the bank was not federally insured.
Home State's collapse triggered the state's biggest banking crisis since the Great Depression, closing state-insured thrifts across Ohio.
Home State's owner, Marvin Warner, and nine others associated with the bank went to prison for their roles in the bank's failure.
The liquidation of bank assets began soon after the state bailout. At the time, investigators were not optimistic about recovering much money.
“In the initial days of the liquidation, it was very, very gloomy,” said Mark Elsener, a partner in the law firm that handled the liquidation.
The firm — Porter, Wright, Morris & Arthur — first had to sift through thousands of financial records to determine the bank's liabilities, assets and how much could be sold off.
Mr. Elsener said it was a time-consuming job that sent staff attorneys all over the country to search for Home State's holdings and, in some cases, to fight court battles over money owed to the bank.
“Nothing was easy,” Mr. Elsener said. “Nothing was black and white.”
The problem, he said, was that the laws covering the liquidation of bank assets had not been used in more than 50 years. “No other institution had gone under since the Great Depression,” Mr. Elsener said.
Although it took time, he said, the firm's work on Home State began to pay dividends by the late 1980s.
He said at least $95 million was recovered from the multitude of lawsuits the firm handled in the wake of the bank's collapse.
Several million more came to the state from Mr. Warner's personal bankruptcy.
Mr. Elsener said the rest of the recovery, which is expected to exceed $140 million, came from the sale of real estate, apartment buildings, offices and other properties owned by Home State.
The original state bailout was for $130 million, but with interest the total climbs to at least $150 million.
Mr. Elsener said those involved in the liquidation are relieved — and a little surprised — that the recovery exceeds the state's original bailout.
He said he doubts, however, the final total will cover interest owed to the state.
“I think when you look at these recoveries, it's pretty remarkable,” Mr. Elsener said. “Whenever you are able to recoup the principal (state investment), you've far outstripped the recovery in a lot of other liquidation proceedings.”
One reason for the success, he said, is the relatively good condition of many of Home State's real-estate assets. He said the bank's insolvency had little to do with those assets.
Instead, the collapse was brought on by Home State's heavy investment in ESM Government Securities Inc., which sold bonds to governments, institutions and individuals.
The Florida-based ESM had sent out false financial statements that portrayed it as healthy when it actually was deeply in debt. ESM closed in 1985 after federal authorities charged it with fraud.
When Home State's investments in ESM became known, depositors rushed to get their money out. The state eventually was forced to close the bank and bail out depositors.
The state has been trying to get its money back ever since.
Mr. Elsener and Judge Niehaus both described the liquidation as the largest ever in Ohio involving a financial institution.
The judge said he expects to formally close the case when the attorneys complete their work in a few months.
Mr. Elsener said the firm has been paid about $9 million in fees and expenses since beginning the process in 1985. He said the money was drawn from the sale of assets and is not included in the $140 million recovered so far for the state.
He said another $7 million may be recovered for the state before the liquidation is complete.
Home State ordeal almost over
Portune takes on Bedinghaus
Flu or not, we're feeling crummy
Vaccine is best way to escape flu
Employers accused of profiting at kids' expense
Firefighters suspended in flap over testing
Flynt preparing designs for store
Group homes found lacking
New pool may give school's a break
School levies moving toward forefront
2nd District up for grabs
Butler Co. races heat up
Congressional ballots fill out
Two judges to run for Ohio Supreme Court
Zoo's female cheetah dies
Warren judge retiring midway through term
N.Ky. man in line for top utilities job
Now is good time to take time with kids
Queen City's moments to shine reflected in book
Tornado cleanup closes college
College designs grab top grades
GET TO IT
How to dispose/recycle your Christmas tree
Firm owned by Voinovich's brother files for bankruptcy
Gender equity to be discussed at Beechwood
Long family tradition ends with fire chief's retirement
Man who put weedkiller in medication gets 4 years
New bride will be Boone Co. PVA
New school found for boy who sued
Patton visits Owensboro, offers state assistance
Rest home owner to fight revocation
Slow water problem fixed
Subdivision wants trees around proposed store
TRISTATE DIGEST
