Thomas Spiegel, once the nation's highest-paid thrift boss, went on trial Tuesday on charges of using Columbia Savings funds to lavish guns, cars, a resort condo and other benefits on himself.
Jury prospects filled out questionnaires to help U.S. District Judge Robert M. Takasugi pick a panel to decide whether Spiegel defrauded Columbia with four schemes, and lied to conceal them.Takasugi was interviewing the prospects in private. Opening statements were scheduled for Friday.
Spiegel's notoriety stems from his taste for junk bonds from convicted financier Michael Milken's operations at the Drexel Burnham Lambert investment bank. A close Milken ally, Spiegel bought and traded more high-yield bonds than any other thrift executive.
The allegations include accepting an illegal reward for Columbia's investments in Drexel deals, in particular its funding of the Storer Communications buyout by the Kohlberg Kravis Roberts investment firm.
Spiegel has pleaded not guilty. His lawyer, Richard Marmaro, has declined to discuss the case.
The indictment concerns events from 1986 to 1989, during much of which time Columbia was the country's most profitable thrift before the collapse of the junk bond market. In a trial memorandum filed Monday, prosecutors John F. Walsh and Sean R. Berry described the government's side of the case:
"Although Spiegel was by a considerable margin the highest paid savings and loan executive in the United States, receiving salaries and bonuses of between $5 (million) and $10 million each year, those millions were simply not enough in his mind."
When regulators and others questioned his lofty pay, an enraged Spiegel decided to obtain it "any way he could," the prosecutors wrote.
The Drexel-related allegations accuse Spiegel of pocketing a valuable investment that should have been Columbia's: an "equity sweetener" bestowing part ownership in Storer should the risky, debt-driven takeover work out.
Spiegel kept the equity, with enormous profit potential at relatively little cost, until another Columbia executive confronted him, the indictment alleges. He then gave back to the thrift the investment, which had cost him $132,000 and ultimately would have brought him $7 million in profit.
The other schemes described in the 46-count indictment accuse Spiegel of:
- Causing Columbia to buy and furnish for his exclusive use a condominium in a luxury resort near Palm Springs by misrepresenting to Columbia's board that it was for general business use of Columbia officers and employees. The furnishings in that property cost more than $1 million.
- Causing Columbia to pour $30 million into the car dealership of a friend, Howard Schneider, even though Spiegel knew Schneider had falsified his financial statements. Spiegel's intent was personal use of luxury cars and a chance to become Schneider's business partner without investing his own money, according to the indictment.
- Causing Columbia to pay tens of thousands of dollars to assemble a weapons collection, much of which was moved from the S&L's Beverly Hills headquarters to his own home when he resigned from Columbia in 1989.
Takasugi has denied a defense request to introduce evidence that would help explain Spiegel's obsession with guns and his insistence on what regulators, in a separate legal action, called a bulletproof "survival chamber" in Columbia's headquarters.
Court papers reveal that Spiegel wanted to argue that a "Children of the Holocaust" syndrome caused his security concerns.