Government banking regulators have stepped up efforts to get Charles W. Knapp to return $2 million in severance pay he received just before he was forced out as chairman of Financial Corp. of America in August.
A spokesman for the Federal Home Loan Bank Board confirmed yesterday that three letters have been sent to FCA asking that Knapp be forced to return the money. According to press reports, the $2 million was placed in a private Swiss bank account for Knapp, beyond the reach of banking regulators and FCA shareholders.
Two of the letters were sent by the bank board. A third was sent last week by the Federal Home Loan Bank of San Francisco, which regulates the West Coast S&L, the spokesman said.
Knapp resigned Aug. 28 under pressure from bank board officials, who believed his departure was needed to begin restoring investor and depositor confidence in American Savings and Loan, FCA's principal subsidiary and the largest savings and loan institution in the nation. Heavy deposit outflows began at American Savings and Loan in August after the company was forced to restate its $31.3 million second-quarter profit as a $107.5 million loss, following a dispute over accounting techniques with the Securities and Exchange Commission.
Financial Corp. officials yesterday would not comment on the $2 million severance payment, as has been their policy since the payment was disclosed. Bank board officials said the recovery of the funds is a serious matter, but declined to say what action would be taken if the company either does not, or cannot, force Knapp to give back the payment.
Depositors, stockholders and analysts are waiting anxiously for Financial Corp. to annnounce what happened to its deposits and profits during the third quarter, which ended last month. The company experienced a net deposit outflow in July of $582 million, and about $15 billion in certificates of deposit and other term accounts were scheduled to mature in the three months ending Sept. 30.
It is widely believed that the massive outflow of deposits has slowed, following strong support for the S&L by the bank board, including its endorsement of the selection of longtime industry executive William J. Popejoy as Financial Corp. chairman.
Financial Corp. directors agreed to give the bank board broad power to evaluate and direct many of the company's activities, including replacing officers and directors and ruling on increases in executive compensation, in return for a guarantee of financial support from the government.
Financial Corp. continued yesterday to sell certificates of deposit through a group of investment brokers led by Prudential-Bache Securities. The company has raised $650 million through the brokered deposits, which are being offered mainly to retail investors. Its goal is to raise $1 billion.