A Baltimore judge placed Ridgeway Savings and Loan Association of Catonsville into conservatorship today after state officials alleged the $17 million thrift was being operated in an "unsafe and unsound" manner that included illegal insider loans and wholesale violations of state regulations.
Baltimore Circuit Court Judge Joseph H.H. Kaplan also banned withdrawals by the thrift's 1,200 depositors for 90 days and slashed interest on savings accounts at the suburban Baltimore institution to 5.5 percent.
Ridgeway is the fifth state-chartered savings and loan to be taken over by the state since May, when depositor runs on the Old Court Savings and Loan Association of Baltimore triggered a broad thrift industry crisis.
In a related development, a source familiar with the investigations stemming from the crisis said today that lawyers representing the receiver of Old Court are looking into whether former Old Court president Jeffrey Levitt and his wife Karol have withdrawn close to $300,000 since August from their account at another thrift.
In May the state seized control of Old Court, and over the summer it filed a $200 million civil suit against the thrift's officers and owners. As a result of that suit, Levitt agreed on Aug. 5 to limit his personal spending. In September, the state won a court order limiting such spending by Levitt and his wife to $1,000 a week.
A spokesman for the Maryland Deposit Insurance Fund said today the state would now move to find a buyer for Ridgeway, which has offices in Catonsville and Ellicott City. "A number of institutions" had expressed interest in acquiring Ridgeway in the past, said MDIF spokesman John Rydell.
Ridgeway attorney Robert Greenwalt, who also serves as a director of the thrift, did not contest the state's action today, but he said the association "disagrees" with the state's allegation that Ridgeway was in an "unsound" condition.
Greenwalt conceded that the thrift had failed to get prior approval from the state Division of Savings and Loan before making about $3.2 million in loans to officers and owners of the association, but he said the failure was an oversight. "I think that they are all good loans," said Greenwalt. "We have payments on them, they are all current, and I don't think there is any danger."
But one state official familiar with the operation of Ridgeway said the Catonsville thrift "had about every problem in the book . . . . It's fair to say it is an institution that is pretty much of a wreck."
In its petition for a conservatorship, MDIF alleged that Ridgeway had made numerous loans to directors and officers without seeking state approval and that some of the loans were delinquent. The state also alleged that:
*The thrift violated state rules by approving loans to officers that exceeded 10 percent of the association's assets, including $2.4 million in loans to David and Nancy G. Rouen and partnerships in which they had an interest. That loan to the Rouens, who together control 99 percent of the thrift's stock, equaled 15 percent of the association's assets.
*The association approved individual loans that exceeded 100 percent of its net worth in violation of state regulations. One $1.8 million loan to a partnership that involved thrift officers was five times the association's net worth.
*The thrift engaged in such poor loan documentation and underwriting practices that "not one loan file examined by state examiners or the federal examiners contained all the documentation" required by state regulations. Many loan files, said the petition, lacked such supporting data as appraisals, title insurance policies and credit reports. One loan to a partnership in which officers had an interest was granted with no loan application, no financial statements, no settlement sheet and no deed of trust recorded for five months after the funds were lent. Federal examiners estimated there would be an $800,000 loss on that loan.
*A large number of the association's loans were delinquent, including 16 percent of all mortgage payments and 25 percent of all consumer loans.
*During the last week of November and the first week of December, the thrift had a negative savings outflow of about $35,000, and would have a negative cash balance within two months.
The state's petition for conservatorship also questioned the legality of the conversion of the thrift from a mutual, or depositor-owned, thrift to a stockholder-owned association in February 1985, when Rouen and his wife assumed control. The previous president of the board of directors, W. Walter Farnandis, sold proxies obtained from depositors to Rouen in exchange for a payment of $275,000 plus $100,000 a year. The sale of proxies has been ruled illegal by the state Division of Savings and Loan.
In 1980, Rouen testified in a criminal trial in Miami that he paid the Dade County, Fla., school superintendent $60,000 to $70,000 in kickbacks after Rouen's Baltimore firm sold a reading skills program to the school system.