Seven of the thrift institutions that owned Nationar, a joint-venture bank seized three weeks ago by New York regulators, are threatening to sue the institution's officers and directors.
If they are unable to reach a settlement, the New York thrifts intend to accuse Nationar chairman Robert P. Rittereiser, his predecessor William Sheluck Jr., and other officers and directors of negligence, gross negligence, corporate waste, and breach of fiduciary responsibility.
"Their wrongful actions and reckless omissions ... have caused extensive financial damage to Nationar," the thrifts charged in a letter delivered Feb. 17 to Neil D. Levin, acting New York State banking superintendent .
The thrifts asked Mr. Levin to take legal action or sanction a suit by them if a settlement isn't reached with Nationar's insurers, said Douglas J. McClintock of Thacher Proffitt & Wood in New York, the lead attorney for the thrifts.
Other officers of Nationar, which processed checks and other transactions for savings banks and other institutional customers, could be named in a lawsuit pending results of due diligence by the owners' attorneys, Mr. McClintock said.
The group's letter, obtained by American Banker, was sent on behalf of Green Point Savings Bank, Independence Savings Bank, Jamaica Savings Bank, Long Island Savings Bank, River Bank America, Roosevelt Savings Bank, and Savings Bank of Utica.
Nationar was taken over Feb. 6 by the New York State Banking Department when it ran into severe liquidity problems. That came less than 23 months after Mr. Rittereiser, a former top executive at Merrill Lynch and E.F. Hutton, was hired to turn the ailing company around.
The thrifts told Mr. Levin that Nationar directors and top officers failed to take necessary steps to reduce operating expenses or appropriately oversee the company's operations during a three-year period of worsening losses that added up to at least $52.5 million.
The thrifts said Nationar officials managed the company "contrary to sound business and financial policies and recklessly engaged in speculative and unsound business transactions."
The letter cited officials' failure to protect the company's long-term liquidity by allowing all of its funds to be subject to immediate withdrawal. About two weeks before Nationar was seized, the company had a run on its funds, caused in part by admissions by Mr. Rittereiser about the impending liquidation, the letter said.
Company officials also allowed Nationar's item-processing business to operate in the red for more than three years and then took an unusually high bid from Fiserv Inc. to buy the operation against the advice of senior vice president Charles A. Spence, the company's technical expert. Fiserv withdrew its bid shortly before Nationar's collapse.
In addition, the thrifts said Nationar officials made reckless investments that caused the value of the securities portfolio to plummet when interest rates rose. At Dec. 31, 1994, the portfolio had an aggregate unrealized loss of $12 million.
Finally, officials were accused of not adequately integrating into Nationar a credit union services business acquired from Chase Manhattan Bank. That led to substantial write-offs and forced Nationar to hire outside consultants and set aside a $3 million reserve.
The thrift owners described the management's performance as "effectively an abdication of their duty to control, supervise, and manage the activities of Nationar."