The executive committee of McLean Savings and Loan is consulting with the Federal Home Loan Bank Board to determine the future of the head of its mortgage banking subsidiary, who faces civil charges of negligence in the failure of a Rockville savings institution.
Robert N. Reeves, who is head of McLean Financial Corp., was president of County Federal Savings and Loan Association of Rockville when it failed in 1981. County was later absorbed by Metropolitan Federal Savings and Loan.
Reeves and 19 other former directors, officers and employes of County have been charged with violating various banking laws and regulations in the failure of County Federal. The charges were brought by the Federal Savings and Loan Insurance Corp., which arranged the merger with Metropolitan Federal and suffered losses of $21 million in the process. The FSLIC operates under the direction of the Bank Board.
John E. Harn II, executive vice president of McLean Savings, said yesterday in an interview the committee was prepared to follow the Bank Board's suggestions on whether or not to remove Reeves from his post until the suit is settled.
Bank Board lawyers declined to discuss the case, although deputy general counsel Ralph Christy said that the civil action alone would not bar a person from continuing in the same business.
The government is suing the former County officers, directors and employes to recoup the $21 million, plus $5 million in punitive damages. It charges, among other things, that the officers made risky loans to construction companies, covered them up with false reports to regulators, and received excessive bonuses. It alleges that Reeves, Thomas J. O'Halloran Jr., County's executive vice president and chief loan officer, and others committed civil fraud by making payments to contractors for work they knew had not been done.
O'Halloran, who was accused by the FSLIC of diverting business from County's service corporation to his own real estate appraisal firm, does appraisals for McLean Financial Corp. However, he is not an employe, Harn said.
Reeves was out of town yesterday and could not be reached for comment. O'Halloran did not return a reporter's call.
Prior to County's failure, Reeves and two partners approached McLean Savings with a proposal to set up a mortgage banking subsidiary, Harn said. McLean Financial Corp. was incorporated in July 1981 with Reeves and the partners as 49 percent stockholders.
Harn said yesterday that approval for the venture was given only after he and the other executive committee members had consulted with Metropolitan Federal and the Bank Board. He said the terms were that McLean Savings would retain control of the subsidiary, would have legal counsel review its transactions and would permit no speculation in the mortgage market. All of the subsidiary's directors are also directors of McLean Savings, except for Reeves.
McLean Financial has gained a reputation as an aggressive lender, according to the Mortgage Bankers Association. It operates in 40 states, making loans to homebuyers and selling them to investors. Its activities are separate from those of McLean Savings, except that the S&L warehouses the loans until they can be sold.
McLean Financial's loan volume has soared. During the month of October, for example, it increased 150 percent to $75 million, according to the Wall Street Journal. McLean Financial was offering intermediate-term mortgage loans at lower than market rates. Executive vice president Frank Howard was quoted as saying investors liked to buy this type of loan because, despite the lower yields, they got their money back more quickly for reinvestment.
"As a group they have a good handle on that kind of business," said Harn, speaking of Reeves and his partners. In fact, he added, their activities caused the parent company's profits to quadruple--rather than just double--in the past year.
The suit against Reeves would not jeopardize the financial condition of McLean Financial, he said.