John Christo Jr. lost his Florida bank to foreclosure last Thursday - or did he?

When Mr. Christo's Bay Bank and Trust in Panama City was auctioned to satisfy a longtime debt to Alabama-based SouthTrust, his friend Kenneth Earl Padgett had the winning bid.

With his $8.5 million bid, Mr. Padgett beat out SouthTrust and Memphis-based Union Planters Corp. - as well as other individuals - in the Birmingham auction.

According to an account in Panama City's News Herald, Mr. Padgett and Mr. Christo Jr. were greeted afterward at a Panama City airfield by a small crowd cheering Christo family members and Bay Bank employees. One family member held up a sign bearing one word to express her feelings about losing the bank: "Never."

Never is a long time, and just who will eventually control and run Bay Bank is still an open question. Mr. Padgett presumably will own the institution, but will he keep Mr. Christo Jr., currently the subject of removal actions by both state and federal regulators, in some kind of executive position?

The answer is still up in the air, but the Christo family is certainly acting as if it has won this latest battle in an increasingly bizarre war with Comptroller Gerald Lewis, Florida's publicly elected top banking regulator.

Mr. Lewis now must review Mr. Padgett's application for a change in control.

Calls to Mr. Padgett's office went unanswered this week. Mr. Christo Jr. did not respond to requests for comment, nor did Bay Bank's lawyer, Jack Williams.

The story actually begins in the early 1980s, when the Christos borrowed $7 million from South Trust and secured the loans with their 97% ownership position in $153 million-asset Bay Bank, which had a 26% deposit share in Panama City.

Thrift Failed in 1991

The loans were used to buy Bay Bank in 1983 and to capitalize Bay Savings Bank, which Mr. Christo Jr. founded in 1986.

But Bay Savings failed in 1991, and the Office of Thrift Supervision three weeks ago petitioned the Treasury Department to bar Mr. Christo Jr. from banking for allegedly failing to notify regulators of the thrift's free fall into insolvency in 1990.

Meanwhile, the SouthTrust loans went into default in January of this year, and SouthTrust began foreclosure proceedings.

Lawsuit Cites a Conspiracy

In response, the Christos filed a lawsuit contending that SouthTrust and Comptroller Lewis, had conspired to seize the bank in retaliation for Mr. Christo Jr.'s political failing out with the state regulator.

The Christo lawsuit contended that Mr. Lewis had accepted gifts of vodka and Cuban cigars from Mr. Christo in the past but the pair had a falling out in 1990 when the family refused to give $25,000 to Mr. Lewis' campaign. Mr. Christo Jr. later backed a bid in the Florida legislature to impeach Mr. Lewis.

Mr. Christo Jr. has accused Mr. Lewis of launching a vendetta against him, a charge the comptroller has denied. He has also denied ever taking gifts from the Christos.

Mr. Lewis' department has charged that Bay Bank has violated insider lending laws. In addition, the Federal Deposit Insurance Corp. has charged the bank with violating Regulation O and has issued a cease-and-desist order.

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