Gordon's Success at SFFed Clouded by Loan Scandal
In the past year, SFFed Corp. chief Roger L. Gordon has experienced both the brightest and the bitterest moments of his career.
Mr. Gordon took over last year as chief executive of the $3.4 billion-asset SFFed, parent company of San Francisco Federal Savings and Loan Association, capping 28 years with the thrift. He assumed the post of chairman one month ago.
Loans to Auditor Result in Fine
But the 49-year-old chief executive has not been able to savor his accomplishments. In a widely publicized case, Mr. Gordon bowed to pressure from the Office of Thrift Supervision in April and, without admitting any wrongdoing, agreed to pay a $5,000 personal fine for his handling of a series of loans to SFFed's outside auditor.
SFFed made loans totaling $875,000 in 1984-89 to its KPMG Peat Marwick auditor for buying land and building a house. Mr. Gordon handled the credits.
SFFed said the loans were standard and fully secured. The OTS maintained that the credits were not made at arm's length and involved several "special considerations," such as relaxed debt-to-income standards. In addition, the agency noted, loan documents were kept in Mr. Gordon's personal files.
In an interview, Mr. Gordon stressed that nonconcessionary home loans to auditors are legal and conform with accounting industry ethical guidelines. Mr. Gordon said he was "completely aghast" when the OTS accused him of impropriety, and that he settled only to avoid a lengthy lawsuit.
"To me, a cease and desist [order] is about the worst thing you could have," he said. "It went against every moral fiber in my body to sign it, because it was copping a plea. To me, crooks cop a plea."
Those who know Mr. Gordon describe him as an honorable man who failed to see the potential for conflict in the loans to the auditor. "He's a real straight guy, well intentioned, straightforward, and honest," said Joseph A. Jolson, thrift analyst with Montgomery Securities, San Francisco. "The OTS accusations hurt him a lot."
One ironic side effect of the OTS affair was to give the self-effacing Mr. Gordon wide visibility. He had labored for years in the shadows of his predecessor, the high-profile Patrick H. Price, a former president of the California League of Savings Institutions.
Mr. Gordon, the son of a San Joaquin Valley real estate developer, got his start with SFFed in 1962 while still in college. His first assignment was managing and selling 118 foreclosed units in a San Jose housing development. "I was running the fix-up crews," he recalled.
Focus on Residential Realty
SFFed has managed to avoid many of the thrift industry's most severe problems by keeping its focus on California residential real estate. But, analysts say, high overhead costs and poor acquisitions have depressed profits in recent years.
Mr. Price focused on building SFFed's franchise through acquisitions. But Mr. Gordon says his top short-term priority is boosting profits. Return on assets, though improving, has remained below a paltry 0.60% in recent years.
To build profits, Mr. Gordon has focused on trimming expenses. Last year, he engineered a $125 million exchange of deposits with American Savings Bank, based in Stockton. That allowed him to close six of 44 retail branches.
Mr. Gordon says he feels comfortable with analysts' 1991 earnings estimates in the $2.25 to $2.50-a-share range, or $17.5 million to $19.3 million.
"This will be the best year the company ever had," he said. "But we've got a long way to go."