Federal thrift regulators moved to bar John Christo Jr., a prominent Florida banker, from the industry because he allegedly misled regulators about the condition of the failed Bay Savings Bank in West Palm Beach in 1988 and 1989.

It's the latest turn in the Christo family saga, with regulators alleging unsafe and unsound banking practices and the Christos alleging a political vendetta.

The Office of Thrift Supervision on Aug. 27 filed charges against Mr. Christo Jr., two of Bay Savings former officers, including his chief executive, and another director of Bay Savings.

Restitution Sought

The agency seeks to bar Mr. Christo Jr. from any participation with a federally insured depositary institution and seeks civil money penalties of $3.4 million against him and his family trusts, an amount equal to Bay Savings capital deficit when it failed in September 1991.

"I intend to fight it," said Mr. Christo Jr.

Mr. Christo Jr. is currently chairman of Bay Bank and Trust Co. in Panama City, Fla. His family owns Bay Bank and his son, John Christo 3d, is its vice chairman. The bank is also currently embroiled in a legal dispute with Florida's top bank regulator, Comptroller Gerald Lewis.

Link to State Regulator Seen

Mr. Christo Jr. responded to the OTS charges in a written statement in which he linked the federal action with his problems with Mr. Lewis.

"These allegations are apparently part of the continuing political vendetta by Florida Comptroller Gerald Lewis against John Christo Jr.," the statement said: "Such charges will be vigorously defended."

Reached last week at Bay Bank, Mr. Christo Jr. expressed surprise and defiance against the federal action.

"In all our dealings with the OTS, there was never any talk about me being prohibited from banking," he said. "They even praised US in the exit interview in our final examination [at Bay Savings]. I lost $4 million on [Bay Savings] and never drew a salary or got a loan."

Agreement on Capital

In its notice of charges, the OTS pointed out that Bay Savings was founded by Mr. Christo in 1986. In order to get deposit insurance, two of Mr. Christo's family trusts and an employee stock ownership entity, which owned Bay Savings, agreed to a capital maintenance agreement.

After losses eroded its capital, Bay Savings had a $3.4 million net worth deficiency by September 1990, according to the OTS, The regulators made demands on Mr. Christo to live up to the capital maintenance agreement, but the only new capital put into the thrift was $660,000 in May 1989.

The OTS also charged that Mr. Christo and the thrift's officers and directors filed inaccurate yearly financial statements with the regulators in 1988 and 1989. The OTS said that between October 1989 and January 1991, it was "unable to verify that there was a capital deficiency and the amount thereof."

Audits Not Submitted

The OTS was also unable to determine the amount due under the capital maintenance agreements, because of Bay Savings' failure to submit the 1989 and 1990 audits to the OTS.

For instance, Bay Savings did not submit its 1989 audited financial statement to the OTS until March 28, 1991, and the OTS charges that the statement was "defective in material respects."

"They know we spent $350,000 trying to get an accounting firm to audit our statements," Mr. Christo Jr. said. "Accounting firms. weren't exactly eager to give their stamp of approval on thrift financial statements at the time."

The agency alleged that Mr. Christo unjustly benefited from those actions, but does not charge that he ever took money out of the institution through loans or otherwise.

"They don't lay out [how I benefited] because there's nothing to lay out," Mr. Christo Jr. said.

Suit Against Comptroller

Meanwhile, at Bay Bank the Christos are facing more regulatory problems. The Christos have filed suit against Mr. Lewis, claiming he has tried to remove them from Bay Bank's management because they didn't financially support his last election campaign. Mr. Lewis, through a spokesman, has denied the allegation.

And the Federal Deposit Insurance Corp. is considering action against Bay Bank for unsafe and unsound practices, including violations of insider lending laws, according to a recent report in this newspaper. Mr. Christo 3d said he would fight both federal and state actions against him and Bay Bank.

Mr. Christo Jr. stated that his relations with federal regulators were good until his relations with the Florida comptroller soured.

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