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WHEN TRIAD MIXED WITH A TEXAS S&L, GIANT MESS RESULTED

SHARE WHEN TRIAD MIXED WITH A TEXAS S&L, GIANT MESS RESULTED

What do you get when you mix Triad America and the savings and loans crisis?

Don't ask, Triad's attorneys advise.Triad America's finances are, in themselves, messy. But Triad's finances raised the standard of "messy" to a new level in the early 1970s when Adnan Khashoggi took out multimillion-dollar loans and made land swaps with Mainland Savings Association in Houston. Mainland later became the first billion-dollar savings and loan failure in the United States.

Now attorneys for Triad and the FDIC are sorting through the years and deals to find out just who owes what to whom.

The sorting is of great interest to other Triad creditors because a large, third payment scheduled to go out to creditors in June relies on the peaceful settlement of the Mainland claim.

The FDIC - on behalf of Mainland - has filed a $57 million claim against Triad, saying the estate owes the government that much because of a series of deals Khashoggi made with the S&L that fell through.

The complicated relationship between Khashoggi, Triad America and Mainland is taking months to sort out.

"There were more loans and land swaps involved in this than anything else I've seen in Triad," said Danny Kelly, attorney for Triad Trustee R. Todd Neilson.

Khashoggi took out several loans from Mainland to buy parcels of land in Houston. He used one major parcel - a pricey 22-acre piece across the street from the famous Houston Galleria - to secure many of his deals with Mainland, Kelly said. "Khashoggi was going to buy up that whole area of town. He was borrowing to do that."

As with his other U.S. deals, Khashoggi's Houston plans fell through. Mainland foreclosed on all Khashoggi's Houston properties several years ago. But the land - including the Galleria piece - didn't fetch the price on Houston's sluggish market that the S&L had hoped for.

Now the FDIC - on behalf of Mainland - would like $57 million out of the Triad estate to settle Khashoggi's account.

"In effect, the FDIC is trying to say all the losses it experienced related to that whole Khashoggi mess in Houston is the Triad estate's responsibility," Kelly said. "We deny that."

Triad's denial of responsibility - coupled with the specter of a protracted court battle over the issue - has brought the FDIC to the bargaining table with a more modest figure in mind.

"We've gone from $57 million to $5 million fairly quickly," Kelly said. "We have struck a tentative deal that is unofficial and not yet approved by the court." Nielson and his lawyers are offering to acknowledge the FDIC's claim of $5 million and pay the same percentage of that claim as they are paying of all other allowed claims.

In exchange, the FDIC must drop the remaining $52 million from its claim.

If the settlement sticks together, Nielson hopes to distribute approximately $7 million to creditors before the end of June, Kelly said. "We striving to pay 50 percent of the allowed claims by the end of this year. Right now, we've paid 22 percent."

The June distribution will bring the total payments to creditors up to 40 percent to date. "We are hoping for at least one more distribution this year," Kelly said.