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'''CenTrust Bank, A State Savings Bank''' was a [[Miami]], Florida-based [[savings and loan]]. Its failure in 1990 was one of the largest and costliest failures of the [[savings and loan crisis]].

⚫
'''CenTrust Bank, A State Savings Bank''' was a [[Miami]], Florida-based [[savings and loan]]. Its failure in 1990 was one of the largest and costliest failures of the [[savings and loan crisis]].


{{Infobox bank|name=CenTrust Bank|founded=1934|defunct=1990}}
{{Infobox bank|name=CenTrust Bank|founded=1934|defunct=1990}}
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Dade Savings & Loan Association opened in 1934. In 1983, the failing thrift was acquired by real estate developer David L. Paul and the following year was renamed CenTrust Savings & Loan Association. It grew rapidly to become the largest thrift in the southeastern United States, with over $9 billion in assets at its peak in 1989.
Dade Savings & Loan Association opened in 1934. In 1983, the failing thrift was acquired by real estate developer David L. Paul and the following year was renamed CenTrust Savings & Loan Association. It grew rapidly to become the largest thrift in the southeastern United States, with over $9 billion in assets at its peak in 1989.


The bank was placed into government conservatorship in February 1990, with [[Great Western Bank (1919-97)|Great Western Bank]] acquiring the bank's assets in June 1990.<ref>U.S. Seizes Centrust Of Miami ''New York Times'' February 3, 1990[http://www.nytimes.com/1990/02/03/business/us-seizes-centrust-of-miami.html]</ref><ref>CenTrust sold to California thrift UPI Archives June 29, 1990
The bank was placed into government conservatorship in February 1990, with [[Great Western Bank (1919-97)|Great Western Bank]] acquiring the bank's assets in June 1990.<ref>[http://www.nytimes.com/1990/02/03/business/us-seizes-centrust-of-miami.html U.S. Seizes Centrust Of Miami ''New York Times'' February 3, 1990]</ref><ref>[http://www.upi.com/Archives/1990/06/29/CenTrust-sold-to-California-thrift/3292646632000/ CenTrust sold to California thrift UPI Archives June 29, 1990]</ref> CenTrust had $8.2 billion in assets at that time and was the 23rd largest thrift in the country. The failure resulted in an estimated $1.7 billion loss to the government at the time it was seized.
[http://www.upi.com/Archives/1990/06/29/CenTrust-sold-to-California-thrift/3292646632000/]</ref> CenTrust had $8.2 billion in assets at that time and was the 23rd largest thrift in the country. The failure resulted in an estimated $1.7 billion loss to the government at the time it was seized.


Chairman and CEO David Paul was convicted in November 1993 in federal court on 68 counts of tax fraud, obstruction of justice and misapplication of bank funds.<ref>Ex-Chief of Centrust Bank Is Convicted on 68 Charges ''New York Times'' November 25, 1993
Chairman and CEO David Paul was convicted in November 1993 in federal court on 68 counts of tax fraud, obstruction of justice and misapplication of bank funds.<ref>Ex-Chief of Centrust Bank Is Convicted on 68 Charges ''New York Times'' November 25, 1993
[http://www.nytimes.com/1993/11/25/business/ex-chief-of-centrust-bank-is-convicted-on-68-charges.html]</ref> He was sentenced to 11 years in prison and required to pay $60 million in restitution and a $5 million fine. He later pled guilty to 29 counts of securities violations. He was released from prison in 2004.<ref>Icon Of S&l Extravagance, David Paul, Revels In Freedom ''Orlando Sentinel'' August 3, 2004[http://articles.orlandosentinel.com/2004-08-03/news/0408030211_1_david-paul-miami-centrust]</ref> The government charged that Paul had used bank funds for personal reasons such as making improvements on his home and paying the expenses on his $7 million yacht "Grand Cru." In addition the bank had also bought the sailboat "Bodacious" for $233,000. The bank acquired a $29 million art collection, including the [[Peter Paul Rubens]] painting "Portrait of a Man as the God Mars" for $13.2 million, which Paul kept at his house.<ref>Return of $30 Million Sought From Ex-Chief of Centrust ''New York Times'' October 23, 1990[http://www.nytimes.com/1990/10/23/business/return-of-30-million-sought-from-ex-chief-of-centrust.html]</ref>
[http://www.nytimes.com/1993/11/25/business/ex-chief-of-centrust-bank-is-convicted-on-68-charges.html]</ref> He was sentenced to 11 years in prison and required to pay $60 million in restitution and a $5 million fine. He later pled guilty to 29 counts of securities violations. He was released from prison in 2004.<ref>Icon Of S&l Extravagance, David Paul, Revels In Freedom ''Orlando Sentinel'' August 3, 2004 [http://articles.orlandosentinel.com/2004-08-03/news/0408030211_1_david-paul-miami-centrust]</ref> The government charged that Paul had used bank funds for personal reasons such as making improvements on his home and paying the expenses on his $7 million yacht "Grand Cru." In addition the bank had also bought the sailboat "Bodacious" for $233,000. The bank acquired a $29 million art collection, including the [[Peter Paul Rubens]] painting "Portrait of a Man as the God Mars" for $13.2 million, which Paul kept at his house.<ref>Return of $30 Million Sought From Ex-Chief of Centrust ''New York Times'' October 23, 1990 [http://www.nytimes.com/1990/10/23/business/return-of-30-million-sought-from-ex-chief-of-centrust.html]</ref>


The bank's headquarters were located in the newly built CenTrust Tower (now [[Miami Tower]]), a Miami landmark designed by [[I. M. Pei]] and featured in the opening credits of the television series "[[Miami Vice]]." CenTrust's executive offices were opulent, featuring gold-plated plumbing, gold-leaf ceilings, a $1 million Italian marble staircase, and a bulletproof shower door.<ref>The Banker's Toppled Tower ''Washington Post'' March 19, 1990[https://www.washingtonpost.com/archive/lifestyle/1990/03/19/the-bankers-toppled-tower/77b1be32-d493-4065-a68f-f88d3158a366/?utm_term=.91713bc1f0aa]</ref><ref>Centrust Tower: The R.T.C.'s Shimmery Headache ''New York Times'' April 21, 1991[http://www.nytimes.com/1991/04/21/business/centrust-tower-the-rtc-s-shimmery-headache.html?pagewanted=all]</ref>
The bank's headquarters were located in the newly built CenTrust Tower (now [[Miami Tower]]), a Miami landmark designed by [[I. M. Pei]] and featured in the opening credits of the television series "[[Miami Vice]]." CenTrust's executive offices were opulent, featuring gold-plated plumbing, gold-leaf ceilings, a $1 million Italian marble staircase, and a bulletproof shower door.<ref>[https://www.washingtonpost.com/archive/lifestyle/1990/03/19/the-bankers-toppled-tower/77b1be32-d493-4065-a68f-f88d3158a366/?utm_term=.91713bc1f0aa The Banker's Toppled Tower ''Washington Post'' March 19, 1990]</ref><ref>Centrust Tower: The R.T.C.'s Shimmery Headache ''New York Times'' April 21, 1991 [http://www.nytimes.com/1991/04/21/business/centrust-tower-the-rtc-s-shimmery-headache.html?pagewanted=all]</ref>


When the [[Financial Institutions Reform, Recovery and Enforcement Act of 1989]] was passed it banned the purchase of junk bonds by thrifts and required them to dispose of their holdings by 1995. They were also required to carry the bonds on the bank's books at market value, not face value. The act also disallowed supervisory goodwill by phasing it out through 1995. This resulted in the bank becoming insolvent.<ref>CenTrust Bank reports earnings for Qtr to Sept 30 ''New York Times'' January 18, 1990[http://www.nytimes.com/1990/01/18/business/centrust-bank-reports-earnings-for-qtr-to-sept-30.html]</ref>
When the [[Financial Institutions Reform, Recovery and Enforcement Act of 1989]] was passed it banned the purchase of junk bonds by thrifts and required them to dispose of their holdings by 1995. They were also required to carry the bonds on the bank's books at market value, not face value. The act also disallowed supervisory goodwill by phasing it out through 1995. This resulted in the bank becoming insolvent.<ref>CenTrust Bank reports earnings for Qtr to Sept 30 ''New York Times'' January 18, 1990 [http://www.nytimes.com/1990/01/18/business/centrust-bank-reports-earnings-for-qtr-to-sept-30.html]</ref>


==CenTrust and Bank of Credit and Commerce International==
==CenTrust and Bank of Credit and Commerce International==
[[Bank of Credit and Commerce International]] (BCCI), through nominee Saudi businessman [[Ghaith Pharaon]] became CenTrust's largest shareholder with 28% ownership. Pharaon was also BCCI's nominee owner of Independence Bank of Los Angeles, as well as National Bank of Georgia, which was formerly owned by [[Bert Lance]], a close friend of former United States President [[Jimmy Carter]]. Pharaon was indicted in 1991, and again in 1993 under a revised indictment, but remained a fugitive until his death in 2017. The indictments covered the nominee ownerships of the Georgia and Los Angeles banks, as well as his securities trading activities at CenTrust. BCCI had bought $25 million in subordinated debentures out of a $150 million offering in a sham transaction in 1988, with the securities bought back two months later by CenTrust at a loss.<ref>Federal Reserve Links BCCI To Miami, Georgia Banks ''Washington Post'' July 30, 1991
[[Bank of Credit and Commerce International]] (BCCI), through nominee Saudi businessman [[Ghaith Pharaon]] became CenTrust's largest shareholder with 28% ownership. Pharaon was also BCCI's nominee owner of Independence Bank of Los Angeles, as well as National Bank of Georgia, which was formerly owned by [[Bert Lance]], a close friend of former United States President [[Jimmy Carter]]. Pharaon was indicted in 1991, and again in 1993 under a revised indictment, but remained a fugitive until his death in 2017. The indictments covered the nominee ownerships of the Georgia and Los Angeles banks, as well as his securities trading activities at CenTrust. BCCI had bought $25 million in subordinated debentures out of a $150 million offering in a sham transaction in 1988, with the securities bought back two months later by CenTrust at a loss.<ref>Federal Reserve Links BCCI To Miami, Georgia Banks ''Washington Post'' July 30, 1991
[https://www.washingtonpost.com/archive/politics/1991/07/30/federal-reserve-links-bcci-to-miami-georgia-banks/431a2e50-95b3-4e9a-85b1-e221bdbdfe29/?utm_term=.c06c8293b9bf]</ref><ref>Department of Justice Press Release February 8, 1995[https://www.justice.gov/archive/opa/pr/Pre_96/February95/76.txt.html]</ref>
[https://www.washingtonpost.com/archive/politics/1991/07/30/federal-reserve-links-bcci-to-miami-georgia-banks/431a2e50-95b3-4e9a-85b1-e221bdbdfe29/?utm_term=.c06c8293b9bf]</ref><ref>[https://www.justice.gov/archive/opa/pr/Pre_96/February95/76.txt.html Department of Justice Press Release February 8, 1995]</ref>


==CenTrust and Drexel Burnham Lambert==
==CenTrust and Drexel Burnham Lambert==
CenTrust was one of the largest buyers of junk bonds ([[high yield bonds]]) in the country, with over $1.4 billion on the bank's books at its peak. It was part of [[Drexel Burnham Lambert]]'s "daisy chain" of junk bond buyers like [[Lincoln Savings]] in Irvine, Imperial Savings in San Diego, Gibraltar Savings in Simi Valley, Silverado Savings & Loan in Denver and Columbia Savings in Beverly Hills.<ref>Drexel, Milken Join Keating as Class-Action Defendants ''Los Angeles Times'' February 10, 1990[http://articles.latimes.com/1990-02-10/business/fi-385_1_drexel-burnham]</ref>
CenTrust was one of the largest buyers of junk bonds ([[high yield bonds]]) in the country, with over $1.4 billion on the bank's books at its peak. It was part of [[Drexel Burnham Lambert]]'s "daisy chain" of junk bond buyers like [[Lincoln Savings]] in Irvine, Imperial Savings in San Diego, Gibraltar Savings in Simi Valley, Silverado Savings & Loan in Denver and Columbia Savings in Beverly Hills.<ref>Drexel, Milken Join Keating as Class-Action Defendants ''Los Angeles Times'' February 10, 1990 [http://articles.latimes.com/1990-02-10/business/fi-385_1_drexel-burnham]</ref>


CenTrust had dealings with Lincoln Savings' parent [[American Continental Corporation]] when it bought $9 million in [[Playtex]] stock from American Continental Corp. and then sold $9 million in stock of [[Memorex]] to American Continental Corp. The intent was to boost the prices of the stocks on the thinly traded securities and book bogus profits. Both of the stocks were issued by companies that were clients of Drexel Burnham Lambert.<ref>U.S. Tracks Paper Profit Trail From Milken To Centrust ''Sun-Sentinel'' December 31, 1989[http://articles.sun-sentinel.com/1989-12-31/business/8902170943_1_centrust-bank-lincoln-savings-michael-milken]</ref>
CenTrust had dealings with Lincoln Savings' parent [[American Continental Corporation]] when it bought $9 million in [[Playtex]] stock from American Continental Corp. and then sold $9 million in stock of [[Memorex]] to American Continental Corp. The intent was to boost the prices of the stocks on the thinly traded securities and book bogus profits. Both of the stocks were issued by companies that were clients of Drexel Burnham Lambert.<ref>U.S. Tracks Paper Profit Trail From Milken To Centrust ''Sun-Sentinel'' December 31, 1989 [http://articles.sun-sentinel.com/1989-12-31/business/8902170943_1_centrust-bank-lincoln-savings-michael-milken]</ref>


==CenTrust and its political influence==
==CenTrust and its political influence==
Paul extensively used CenTrust's money to gain political influence, with its political action committee contributing $328,000 to campaigns and other political causes.<ref>Miami SL Chief Said To Be In Contact With BCCI Figure ''Washington Post'' August 6, 1991[https://www.washingtonpost.com/archive/business/1991/08/06/miami-sl-chief-said-to-be-in-contact-with-bcci-figure/15e12284-4dad-4116-80f4-150df110ecb6/?utm_term=.e89e227d6864]</ref> Paul was co-chairman of the Democratic Senatorial Campaign Committee with Senator John Kerry (D-MA), with CenTrust contributing $30,000 in political action funds to the Committee. The Committee also leased Paul's yacht for fund-raisers. Paul met with Kerry five times in 1988, while Kerry was investigating BCCI for money laundering.<ref>Tie Between Paul, Leader Of Inquiry Prompts Questions ''Sun Sentinel'' April 3, 1991[http://articles.sun-sentinel.com/1991-04-03/business/9101170115_1_centrust-first-american-bankshares-bcci]</ref> Paul flew in six chefs from France for a $122,000 "Great Chef's Party."<ref>Working Ego to Ego, 6 Chefs Dish Up a Formal Dinner for 60 ''New York Times'' December 7, 1988[http://www.nytimes.com/1988/12/07/garden/working-ego-to-ego-6-chefs-dish-up-a-formal-dinner-for-60.html]</ref> Its 61 guests included Senator Kerry. (Kerry later wrote an opinion piece for the New York Times entitled "Where Is the S&L Money?")<ref>Where Is the S&L Money? ''New York Times'' June 1, 1990[http://www.nytimes.com/1990/06/01/opinion/where-is-the-s-l-money.html]</ref>
Paul extensively used CenTrust's money to gain political influence, with its political action committee contributing $328,000 to campaigns and other political causes.<ref>Miami SL Chief Said To Be In Contact With BCCI Figure ''Washington Post'' August 6, 1991 [https://www.washingtonpost.com/archive/business/1991/08/06/miami-sl-chief-said-to-be-in-contact-with-bcci-figure/15e12284-4dad-4116-80f4-150df110ecb6/?utm_term=.e89e227d6864]</ref> Paul was co-chairman of the Democratic Senatorial Campaign Committee with Senator John Kerry (D-MA), with CenTrust contributing $30,000 in political action funds to the Committee. The Committee also leased Paul's yacht for fund-raisers. Paul met with Kerry five times in 1988, while Kerry was investigating BCCI for money laundering.<ref>Tie Between Paul, Leader Of Inquiry Prompts Questions ''Sun Sentinel'' April 3, 1991 [http://articles.sun-sentinel.com/1991-04-03/business/9101170115_1_centrust-first-american-bankshares-bcci]</ref> Paul flew in six chefs from France for a $122,000 "Great Chef's Party."<ref>Working Ego to Ego, 6 Chefs Dish Up a Formal Dinner for 60 ''New York Times'' December 7, 1988 [http://www.nytimes.com/1988/12/07/garden/working-ego-to-ego-6-chefs-dish-up-a-formal-dinner-for-60.html]</ref> Its 61 guests included Senator Kerry. (Kerry later wrote an opinion piece for the New York Times entitled "Where Is the S&L Money?")<ref>[http://www.nytimes.com/1990/06/01/opinion/where-is-the-s-l-money.html Where Is the S&L Money? ''New York Times'' June 1, 1990]</ref>


Paul met four times with chairman of the [[Federal Home Loan Bank]] M. Danny Wall.<ref>CenTrust Chief's political Contributions Probed ''Washington Post'' March 27, 1990[https://www.washingtonpost.com/archive/business/1990/03/27/centrust-chiefs-political-contributions-probed/d1c58b12-18bc-45e0-84f6-eb46942e6357/?utm_term=.5a40bbaa9b2c]</ref> He also had meetings with Senators [[Bob Graham]] (D-FL), [[John Breaux]] (D-LA), [[Tim Wirth]] (D-CO), [[Ted Kennedy]] (D-MA), [[Joe Biden]] (D-DE), [[Alan Cranston]] (D-CA) and [[Donald W. Riegle Jr.]] (D-MI).(The latter two senators were also members of the [[Keating Five]].)<ref>The Outlaw Bank: A Wild Ride Into the Secret Heart of BCCI By Jonathan Beaty and S. C. Gwynne. Random House. 1993. ISBN 978-0679413844[https://books.google.com/books?id=M_vkgRD3QwwC&pg=PA187&lpg=PA187&dq=centrust+bank+miami+john+kerry&source=bl&ots=gTd3oSO49-&sig=R3ep5lHhcslI95z9H2JuTTfSGzc&hl=en&sa=X&ved=0ahUKEwiG2PmMk9bRAhXMx4MKHZwfCMI4ChDoAQgsMAQ#v=onepage&q=centrust%20bank%20miami%20john%20kerry&f=false]</ref>
Paul met four times with chairman of the [[Federal Home Loan Bank]] M. Danny Wall.<ref>CenTrust Chief's political Contributions Probed ''Washington Post'' March 27, 1990 [https://www.washingtonpost.com/archive/business/1990/03/27/centrust-chiefs-political-contributions-probed/d1c58b12-18bc-45e0-84f6-eb46942e6357/?utm_term=.5a40bbaa9b2c]</ref> He also had meetings with Senators [[Bob Graham]] (D-FL), [[John Breaux]] (D-LA), [[Tim Wirth]] (D-CO), [[Ted Kennedy]] (D-MA), [[Joe Biden]] (D-DE), [[Alan Cranston]] (D-CA) and [[Donald W. Riegle Jr.]] (D-MI).(The latter two senators were also members of the [[Keating Five]].)<ref>The Outlaw Bank: A Wild Ride Into the Secret Heart of BCCI By Jonathan Beaty and S. C. Gwynne. Random House. 1993. ISBN 978-0679413844 [https://books.google.com/books?id=M_vkgRD3QwwC&pg=PA187&lpg=PA187&dq=centrust+bank+miami+john+kerry&source=bl&ots=gTd3oSO49-&sig=R3ep5lHhcslI95z9H2JuTTfSGzc&hl=en&sa=X&ved=0ahUKEwiG2PmMk9bRAhXMx4MKHZwfCMI4ChDoAQgsMAQ#v=onepage&q=centrust%20bank%20miami%20john%20kerry&f=false]</ref>


[[Miami Beach]] mayor [[Alex Daoud]] was convicted of taking $35,000 in bribes to help Paul obtain permits to expand the dock at his house on La Gorce Island for his yacht "Grand Cru."<ref>Ex-mayor Daoud Gets Early Release ''Sun-Sentinel'' April 15, 1995[http://articles.sun-sentinel.com/1995-04-15/news/9504140686_1_holtz-house-arrest-federal-prison]</ref>
[[Miami Beach]] mayor [[Alex Daoud]] was convicted of taking $35,000 in bribes to help Paul obtain permits to expand the dock at his house on La Gorce Island for his yacht "Grand Cru."<ref>[http://articles.sun-sentinel.com/1995-04-15/news/9504140686_1_holtz-house-arrest-federal-prison Ex-mayor Daoud Gets Early Release ''Sun-Sentinel'' April 15, 1995]</ref>


==References==
==References==
{{Reflist}}
{{Reflist}}
* The BCCI Affair A Report to the Committee on Foreign Relations United States Senate by Senator John Kerry and Senator Hank Brown December 1992 102d Congress 2d Session Senate Print 102-140[https://fas.org/irp/congress/1992_rpt/bcci/]
* The BCCI Affair A Report to the Committee on Foreign Relations United States Senate by Senator John Kerry and Senator Hank Brown December 1992 102d Congress 2d Session Senate Print 102-140 [https://fas.org/irp/congress/1992_rpt/bcci/]
* Inside Job: The Looting of America's Savings and Loans by Stephen Pizzo, Mary Fricker and Paul Muolo. Harper Collins. 1991. ISBN 978-0060986001
* Inside Job: The Looting of America's Savings and Loans by Stephen Pizzo, Mary Fricker and Paul Muolo. Harper Collins. 1991. ISBN 978-0060986001
* CenTrust Bank, state savings bank : hearing before the Committe on Banking, Finance, and Urban Affairs, House of Representatives, One Hundred First Congress, second session, March 26, 1990.[http://njlaw.rutgers.edu/collections/gdoc/hearings/9/90601298/90601298_1.pdf]
* CenTrust Bank, state savings bank : hearing before the Committee on Banking, Finance, and Urban Affairs, House of Representatives, One Hundred First Congress, second session, March 26, 1990.[http://njlaw.rutgers.edu/collections/gdoc/hearings/9/90601298/90601298_1.pdf]


[[Category:Defunct banks of the United States]]
[[Category:Defunct banks of the United States]]

Revision as of 01:12, 4 March 2017

CenTrust Bank, A State Savings Bank was a Miami, Florida-based savings and loan. Its failure in 1990 was one of the largest and costliest failures of the savings and loan crisis.

CenTrust Bank
Founded1934
Defunct1990

Background and downfall

Dade Savings & Loan Association opened in 1934. In 1983, the failing thrift was acquired by real estate developer David L. Paul and the following year was renamed CenTrust Savings & Loan Association. It grew rapidly to become the largest thrift in the southeastern United States, with over $9 billion in assets at its peak in 1989.

The bank was placed into government conservatorship in February 1990, with Great Western Bank acquiring the bank's assets in June 1990.[1][2] CenTrust had $8.2 billion in assets at that time and was the 23rd largest thrift in the country. The failure resulted in an estimated $1.7 billion loss to the government at the time it was seized.

Chairman and CEO David Paul was convicted in November 1993 in federal court on 68 counts of tax fraud, obstruction of justice and misapplication of bank funds.[3] He was sentenced to 11 years in prison and required to pay $60 million in restitution and a $5 million fine. He later pled guilty to 29 counts of securities violations. He was released from prison in 2004.[4] The government charged that Paul had used bank funds for personal reasons such as making improvements on his home and paying the expenses on his $7 million yacht "Grand Cru." In addition the bank had also bought the sailboat "Bodacious" for $233,000. The bank acquired a $29 million art collection, including the Peter Paul Rubens painting "Portrait of a Man as the God Mars" for $13.2 million, which Paul kept at his house.[5]

The bank's headquarters were located in the newly built CenTrust Tower (now Miami Tower), a Miami landmark designed by I. M. Pei and featured in the opening credits of the television series "Miami Vice." CenTrust's executive offices were opulent, featuring gold-plated plumbing, gold-leaf ceilings, a $1 million Italian marble staircase, and a bulletproof shower door.[6][7]

When the Financial Institutions Reform, Recovery and Enforcement Act of 1989 was passed it banned the purchase of junk bonds by thrifts and required them to dispose of their holdings by 1995. They were also required to carry the bonds on the bank's books at market value, not face value. The act also disallowed supervisory goodwill by phasing it out through 1995. This resulted in the bank becoming insolvent.[8]

CenTrust and Bank of Credit and Commerce International

Bank of Credit and Commerce International (BCCI), through nominee Saudi businessman Ghaith Pharaon became CenTrust's largest shareholder with 28% ownership. Pharaon was also BCCI's nominee owner of Independence Bank of Los Angeles, as well as National Bank of Georgia, which was formerly owned by Bert Lance, a close friend of former United States President Jimmy Carter. Pharaon was indicted in 1991, and again in 1993 under a revised indictment, but remained a fugitive until his death in 2017. The indictments covered the nominee ownerships of the Georgia and Los Angeles banks, as well as his securities trading activities at CenTrust. BCCI had bought $25 million in subordinated debentures out of a $150 million offering in a sham transaction in 1988, with the securities bought back two months later by CenTrust at a loss.[9][10]

CenTrust and Drexel Burnham Lambert

CenTrust was one of the largest buyers of junk bonds (high yield bonds) in the country, with over $1.4 billion on the bank's books at its peak. It was part of Drexel Burnham Lambert's "daisy chain" of junk bond buyers like Lincoln Savings in Irvine, Imperial Savings in San Diego, Gibraltar Savings in Simi Valley, Silverado Savings & Loan in Denver and Columbia Savings in Beverly Hills.[11]

CenTrust had dealings with Lincoln Savings' parent American Continental Corporation when it bought $9 million in Playtex stock from American Continental Corp. and then sold $9 million in stock of Memorex to American Continental Corp. The intent was to boost the prices of the stocks on the thinly traded securities and book bogus profits. Both of the stocks were issued by companies that were clients of Drexel Burnham Lambert.[12]

CenTrust and its political influence

Paul extensively used CenTrust's money to gain political influence, with its political action committee contributing $328,000 to campaigns and other political causes.[13] Paul was co-chairman of the Democratic Senatorial Campaign Committee with Senator John Kerry (D-MA), with CenTrust contributing $30,000 in political action funds to the Committee. The Committee also leased Paul's yacht for fund-raisers. Paul met with Kerry five times in 1988, while Kerry was investigating BCCI for money laundering.[14] Paul flew in six chefs from France for a $122,000 "Great Chef's Party."[15] Its 61 guests included Senator Kerry. (Kerry later wrote an opinion piece for the New York Times entitled "Where Is the S&L Money?")[16]

Paul met four times with chairman of the Federal Home Loan Bank M. Danny Wall.[17] He also had meetings with Senators Bob Graham (D-FL), John Breaux (D-LA), Tim Wirth (D-CO), Ted Kennedy (D-MA), Joe Biden (D-DE), Alan Cranston (D-CA) and Donald W. Riegle Jr. (D-MI).(The latter two senators were also members of the Keating Five.)[18]

Miami Beach mayor Alex Daoud was convicted of taking $35,000 in bribes to help Paul obtain permits to expand the dock at his house on La Gorce Island for his yacht "Grand Cru."[19]

References

  1. ^ U.S. Seizes Centrust Of Miami New York Times February 3, 1990
  2. ^ CenTrust sold to California thrift UPI Archives June 29, 1990
  3. ^ Ex-Chief of Centrust Bank Is Convicted on 68 Charges New York Times November 25, 1993 [1]
  4. ^ Icon Of S&l Extravagance, David Paul, Revels In Freedom Orlando Sentinel August 3, 2004 [2]
  5. ^ Return of $30 Million Sought From Ex-Chief of Centrust New York Times October 23, 1990 [3]
  6. ^ The Banker's Toppled Tower Washington Post March 19, 1990
  7. ^ Centrust Tower: The R.T.C.'s Shimmery Headache New York Times April 21, 1991 [4]
  8. ^ CenTrust Bank reports earnings for Qtr to Sept 30 New York Times January 18, 1990 [5]
  9. ^ Federal Reserve Links BCCI To Miami, Georgia Banks Washington Post July 30, 1991 [6]
  10. ^ Department of Justice Press Release February 8, 1995
  11. ^ Drexel, Milken Join Keating as Class-Action Defendants Los Angeles Times February 10, 1990 [7]
  12. ^ U.S. Tracks Paper Profit Trail From Milken To Centrust Sun-Sentinel December 31, 1989 [8]
  13. ^ Miami SL Chief Said To Be In Contact With BCCI Figure Washington Post August 6, 1991 [9]
  14. ^ Tie Between Paul, Leader Of Inquiry Prompts Questions Sun Sentinel April 3, 1991 [10]
  15. ^ Working Ego to Ego, 6 Chefs Dish Up a Formal Dinner for 60 New York Times December 7, 1988 [11]
  16. ^ Where Is the S&L Money? New York Times June 1, 1990
  17. ^ CenTrust Chief's political Contributions Probed Washington Post March 27, 1990 [12]
  18. ^ The Outlaw Bank: A Wild Ride Into the Secret Heart of BCCI By Jonathan Beaty and S. C. Gwynne. Random House. 1993. ISBN 978-0679413844 [13]
  19. ^ Ex-mayor Daoud Gets Early Release Sun-Sentinel April 15, 1995
  • The BCCI Affair A Report to the Committee on Foreign Relations United States Senate by Senator John Kerry and Senator Hank Brown December 1992 102d Congress 2d Session Senate Print 102-140 [14]
  • Inside Job: The Looting of America's Savings and Loans by Stephen Pizzo, Mary Fricker and Paul Muolo. Harper Collins. 1991. ISBN 978-0060986001
  • CenTrust Bank, state savings bank : hearing before the Committee on Banking, Finance, and Urban Affairs, House of Representatives, One Hundred First Congress, second session, March 26, 1990.[15]
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