The New York State Banking Department has sold $40 million of loans from Nationar, a failed check-clearing company, after two Florida thrifts withdrew legal objections to the sale.
Northwest Savings Bank, Warren, Pa., bought the entire package of 27 Nationar loans, which were made to employee stock option plans, after the New York State Supreme Court approved the sale last week.
The state kept $8 million of deposits as part of the Nationar estate because they were not properly documented as collateral for the Nationar loans.
The state also sold the former check-clearing company's Danbury, Conn.- based Sector business to Jack Henry and Associates, Monett, Mo. Sector provided computer support services for daily operations of 33 bank customers.
The two sales mark the last remaining assets of Nationar.
Harbor Financial and Comfed sued Superintendent of Banks Neil D. Levin last month, accusing him of planning to use $1.5 million of their cash collateral to pay off Nationar's debt. The thrifts wanted the court to order Mr. Levin to transfer all the collateral to a buyer or to return the rest to them.
The state rejected the thrifts' claims because the money from Harbor Financial subsidiary Harbor Federal Savings Bank was not documented as collateral. The state also argued in a brief that the savings bank may have violated federal banking law by depositing its $500,000 in cash as additional purported collateral to Nationar to support the employee stock option plan loan.
Federal conversion regulations prohibit any converting institution from financing the purchase of its stock during the conversion.
Since it was illegal for Harbor to provide the money as collateral, the money can be applied toward Nationar's debt, estimated at $29 million when it was seized Feb. 6.
The thrifts have withdrawn their call for an injunction to prevent the sale, but action on the status of the disputed money is still pending before the state Supreme Court. A hearing is expected in August.
"We think the arguments are without merits and are totally inconsistent with the facts in the case," said Harbor attorney Raymond J. Gustini, of Peabody & Brown in Washington. "All the parties who dealt with these matters believed and acted as though they were dealing with collateral. It's all too convenient now to say that it wasn't."
Nationar, a former check-clearing and trust company owned by the state's thrifts, was run by former president and chief executive William Sheluck Jr. from 1982 until March 1993, when he was replaced by former E.F. Hutton president and chief executive Robert P. Rittereiser. Mr. Rittereiser headed the state-chartered company when it was seized by state banking officials after a sudden run on the company's deposits caused a liquidity crisis.