Fallout from the 1980s' thrift debacle continued last week as the Justice Department indicted two former executives of small, now-defunct savings and loans.

More than six years after their institutions failed, the executives were accused of frauds that allegedly cost their institutions hundreds of thousands of dollars.

The U.S. Attorney for the Northern District of Illinois filed indictments against John R. O'Connell of Florida and E.M. Huitt Jr. of Texas.

Mr. O'Connell, 70, is the former president and chairman of Skokie (Ill.) Federal Savings and Loan Association, which he founded and which failed in 1989.

The Office of Thrift Supervision last year banned him and former Skokie Federal president James W. Peters from working for any insured depository institution.

Mr. Huitt, 59, is the former chairman and president of Bay City (Tex.) Federal Savings and Loan Association, which failed in 1988.

The two were charged with involvement in three related fraud schemes during the '80s in which they and other S&L executives allegedly did each other favors that damaged their institutions or deceived regulators about their financial condition, the Justice Department said.

Mr. Huitt planned to plead not guilty at his arraignment this week, said his attorney, David Gerger, of the Houston law firm Foreman DeGeurin & Nugent.

"Mr. Huitt didn't do anything wrong, and we look forward to defending and vindicating him," Mr. Gerger said.

Mr. O'Connell lives in Florida and is too ill to enter a plea in Illinois this week, said his attorney, David Schippers, of the Chicago law firm Schippers, Gilbert & Bailey.

Mr. Schippers said he would ask for O'Connell's arraignment to be continued for a month. "His plea will definitely be 'not guilty,'" the lawyer said.

Mr. O'Connell and Mr. Huitt are each charged with one count of conspiracy, one count of mail fraud, and two counts of wire fraud. Each count carries a maximum penalty of five years in prison and a $250,000 fine.

In the first alleged scheme, Mr. O'Connell and Edwin T. McBirney 3d - currently serving 15 years in federal prison for his S&L dealings - are charged with planning a way to increase Skokie Federal's net worth to appease regulators in 1981.

Mr. McBirney would buy $735,000 of Skokie Federal assets using Skokie Federal loan funds, booking a profit for the institution.

But because regulators would not have approved of such a transaction, Mr. Huitt's Bay City Federal allegedly agreed to be a "nominee purchaser," meaning that some of the money Skokie Federal lent Mr. McBirney was passed on to Bay City, which made the purchase, the indictment said.

Related deals for Mr. McBirney to buy back the assets from the Texas thrift caused more than $300,000 in losses to Bay City, it said.

Subsequent deals between Mr. McBirney and Mr. Huitt brought Mr. Huitt $440,000 in bonuses related to loans that at first earned Bay City fee income but later were delinquent or in foreclosure, the indictment said.

In the second alleged scheme, Mr. O'Connell is charged with arranging in 1982 for Mr. McBirney to buy $999,500 of Skokie Federal assets with a Skokie Federal loan using another nominee purchaser, Texas savings and loan executive Jarrett Woods. Mr. Woods later transferred the assets to Mr. McBirney, the indictment said.

However, one of Mr. McBirney's loans was secured by an apartment complex that later defaulted, giving Skokie Federal about $1 million in losses.

In the third scheme, Mr. O'Connell allegedly earned $800,000 for doing almost no work through a fraudulent employment contract after Mr. McBirney bought a Skokie Federal subsidiary.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.