Andrew Wiederhorn, whose rapid ascent was the talk of the specialty finance sector a few years ago, is proving to be unusually tenacious in tougher times.

The 33-year-old executive was back in his office at the Portland, Ore., headquarters of Wilshire Financial Services Group on Monday. A few days before, armed guards had escorted him the chief executive officer -- from the building on orders from the company's new board of directors.

Mr. Wiederhorn earned a reputation as a financial boy wonder, founding the real estate finance company and building its assets to more than $1 billion while still in his 20s. Now he is fighting to avoid becoming an underage has-been.

Following a bankruptcy reorganization this year, the board suspended him and the 38-year-old president, Lawrence Mendelsohn, saying their fast-growth strategy is no longer appropriate.

Mr. Wiederhorn, who went to court to get back into the building, insisted it is the board that acted precipitously.

"It was quite surprising, and there had been no prior hint to that end," Mr. Wiederhorn said, noting that the action came in a meeting that was ostensibly to discuss strategy. But he added, "I expect that in a couple of days we will be officially removed as CEO and president."

Whatever the outcome, Mr. Wiederhorn's career already has all the twists and turns of a soap opera.

After getting his start in his family's equipment leasing business, he formed Wilshire Financial in 1987 and quickly gained a reputation as an entrepreneur to be reckoned with. Picking over some remains from the savings and loan crisis, the firm acquired First Bank of Beverly Hills, Calif., in 1993, and Girard Savings Bank of San Diego a year later.

Mr. Wiederhorn was pegged a "banking prodigy" in a 1995 American Banker profile, which noted his ambition to acquire $1 billion of bank and thrift assets by the following year.

"Growth is clearly our strategy," Mr. Wiederhorn said at the time. "The banks and S&Ls are the best vehicle to offer customer services to that customer base that we want to hold on to, and using deposits to finance products and services rather than institutional investors makes more sense."

It wasn't to be. Instead, 1996 was the year thrift regulators, taking notice of the rapid growth and lack of internal controls, slapped cease-and-desist orders on the operation.

Mr. Wiederhorn fought back, ultimately taking Wilshire Financial public in December 1996, and taking its real estate investment trust public in April 1998.

Wilshire was hit hard by the liquidity crisis that ruined the home equity sector late last year. Trading of its stock was halted in February, and the company filed for protection a month later under Chapter 11 of the bankruptcy law.

Then things got complicated.

The court approved a reorganization plan in which outstanding senior notes, totaling about $184 million, were converted into common stock of the restructured company. The senior note holders received 96.16 shares of the new common stock for every $1,000 principal amount of the senior notes. The common shareholders got one share for every 77.28 shares they previously owned.

American Express Financial Advisors and Capital Research and Management in Los Angeles -- to whom almost all of the $184 million was owed -- thus traded the debt for shares of new Wilshire stock and gained representation on the board.

At the same time, the chief executive officer of First Bank of Beverly Hills -- which represents about two-thirds of Wilshire Financial's assets -- resigned to join another institution. And the Office of Thrift Supervision designated the bank as a "troubled institution" on June 3, an action that places the company under much tighter controls.

Mr. Wiederhorn said that he had submitted his plan to the restructuring firm Hoolihan, Howard, Lokey, and Zukin in Minneapolis last November, and that the new board never voiced any objections. On Aug. 19., he said, the board abruptly decided that that the plan was too "status quo" and did not do enough to reduce costs. He and Mr. Mendelsohn were suspended for two weeks.

The directors brought in New York turnaround specialists Stephen Glennon and Aaron Brown to run Wilshire Financial. Mr. Brown said Wilshire would turn into a "simpler, more focused company concentrating on what it does well."

"There are just too many different entities interacting with each other right now," he said. "I believe that we should have fewer companies so everybody knows what they're doing and what their title is.

"One of the cardinal rules I tell people is never mess up the financing so much that you actually start hurting the operation," Mr. Brown added. "And that's what happened, not just with Wilshire, but with lots of companies in the sector."

Mr. Brown would not comment on whether Mr. Wiederhorn and Mr. Mendelsohn would be fired, but said that both would remain directors, regardless of what else happens.

"I would say that we're not quite in the turnaround phase yet. We're still in litigation and there is still some negotiation," Mr. Brown said. "There is no confusion from any management sense, only in a legal sense."

Wilshire Financial senior vice president Zan Hamilton added: "This is not a hostile environment, it's very professional. It's almost unnerving that it is so civil."

Mr. Wiederhorn disagreed -- on both counts.

"We believe we've already turned around Wilshire Financial," he said. "We made it through the restructuring, restored liquidity and equity to the company. Wilshire Financial has more than $80 million of equity capital today, and some $700 million of assets. Mendelsohn and I had very long, personal relationships with our lenders that had confidence and comfort that we were there. The company had already crossed the turnaround bridge and was moving forward with its business plan to acquire new assets and resolve them through servicing or finance techniques."

Complicating the picture is Wilshire Financial's relationship to Wilshire Real Estate Investment Trust. The separate, publicly traded REIT owns 14.4% of Wilshire Financial, making it the third-largest shareholder. Mr. Wiederhorn is president and CEO of the REIT, which shares employees, facilities, and computer systems with Wilshire Financial. It also owns the property and the building where both companies are housed.

"We ended up having to go to court and a judge in a circuit court in Oregon issued a restraining order to Wilshire Financial, telling them to leave the REIT alone and let it operate," Mr. Wiederhorn said. "So it wasn't friendly and civil. It's been silly and quite a waste of money and time, and a disruption to the REIT."

Mr. Wiederhorn said Wilshire REIT intends to become internally managed, and any agreements with Wilshire Financial have been "irreparably severed."

Mr. Brown said there is a lot of "badly thought-out financing going on'' in the specialty finance sector in general. "Now people like me ... have to kind of pick up the pieces and get things back on a solid footing, get solid financing for companies, so that going forward they will be much sounder companies.

"There will be much fewer companies in the industry, they won't grow as fast and will be less exciting, but I don't expect another wave of bankruptcies the next time something like this happens. I think people have gotten smarter about how they have to do this stuff."

Mr. Wiederhorn is not so sure that the right people are in place to do the job.

"I think Wilshire Financial will now be challenged by having a consultant who is unfamiliar with the industry and our business stepping into our shoes," Mr. Wiederhorn said. But looking to the future, he added, "Mendelsohn and I are both very large shareholders in the REIT and are lucky to have a second platform to rebuild from.

"I think that with this set of circumstances, Wilshire REIT will break off and head its own way. We do want the best for Wilshire Financial though ... because we own so much of it."

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