The Honorable John D. Dingell Question by Mr. Rowland: "You have heard testimony today that Mr. Levan collected between $50 and $60 million in overall fees from the real estate partnerships during the last ten years. To what extent did those fees contribute to the profitability of the holding company?" [Page 120 of the transcript] Answer: Documents reviewed by OTS indicate the following: during the period from 1981 to 1986, prior to BankAtlantic Financial Corporation's acquisition of the thrift, the general partner and affiliates netted $21.7 million in fees, and the holding company reported a consolidated net income of $12.5 million during the same period. From 1987 through 1990, the general partner and affiliates netted $4.7 million in fees, and the holding company reported a loss of $19.7 million. We assume that the net fees contributed to holding company profitability at first, and later held down its loss. Question by Mr. Rowland: "I understand he [the President of BankAtlantic] left. Why did he leave, do you know?" of the transcript] [Page 124 Answer: Mark Wright resigned as president in May of 1991. We understand that the resignation was requested by Chairman Levan due to concerns with Mr. Wright's performance in the consumer lending area in view of the deficiencies noted by the OTS and FDIC examiners and BankAtlantic's own internal auditors. 32-112 0 - 92 - 5 The Honorable John D. Dingell Page 5 Question by Mr. Dingell: "Employees at BankAtlantic appear to have been involved in kickbacks, charges, possibly embezzlement schemes involving contracts out of New York and New Jersey. What do you folks know about it?" [Page 124 of the transcript] Answer: We believe the question refers to suspected violations relating to home improvement loans purchased by BankAtlantic in those states from Sterling Resources, Inc., a New Jersey corporation. In accordance with the requirements of 12 C.F.R. Section 563.180, BankAtlantic has filed criminal referrals on OTS Form 366 notifying the OTS and the Federal law enforcement authorities of the suspected criminal acts. The institution purchased indirect consumer loans generated by Sterling Resources beginning in 1987. The loans purchased were to consumers in the New York and New Jersey area to finance home improvements. BankAtlantic's portfolio of loans purchased from Sterling totals approximately $52 million. A class action suit has been filed in New York, principally against Sterling and a home improvement contractor, Harbor Crest, on behalf of certain borrowers claiming that they have been defrauded in connection with home improvements financed through Sterling. BankAtlantic is named in the suit as assignee of the mortgages. Upon notice of the suit, management of BankAtlantic notified the Atlanta office of OTS and undertook a review of the loans and the institution's relationship with Sterling. The review disclosed that the institution's internal underwriting and loan administration policies had not been followed, raising concerns about the credit quality of the purchased loans. In connection with the institution's internal audit of this matter, an apparent embezzlement scheme by a loan officer in the consumer lending area was discovered. The embezzlement did not involve Sterling, but the officer was one of those handling the BankAtlantic account. Question by Mr. Dingell: "So there have been referrals relative to officers and employees of this bank to the Department of Justice?" [Page 125 of the transcript] Answer: A criminal referral was filed by BankAtlantic with regard to the alleged embezzlement. We understand that the officer has entered a plea with regard to the embezzlement charge. As a result of the allegations of fraud against Sterling and the extent of the deficiencies noted in the institution's internal review of the handling of the Sterling portfolio, the institution has filed a criminal referral with respect to Sterling Resources and two additional consumer loan officers directly involved in managing the Sterling relationship. officers, an executive vice president and a senior vice president, were terminated by BankAtlantic. Both Pursuant to our conversations, attached is a schedule providing further information concerning the fees and expenses of the general partnerships involved in the exchange transactions with the above-referenced thrift holding company. The information contained in the schedule relates to Please let me know if we may be of further assistance. Lesser of lacurred or reimbursed (258,008) (1,296,000) (2,182,450) (1,877,425) (1,855,814) (1,838,067) 0 (8,411,752) 3. Underwriting commissions (449,225) (1,957,085) (3,978,978) (3,072,150) (3,043,710) (1,782,225) Q (14,275,375) Bet underwriting commissions 50.425 217,455 441,830 341.350 338,190 198,025 1,587,275 (18,420) (:21,173) (425,733) (L,126,372) (1,478,033) (1,486,541) (1,640,732) (1,047,588) (640,072) (135,505) (8,112,080) 34,848 196,041 657,955 1,838,768 1,441,346 1.535,292 1,551,810 942.584 648,261 216.527 8.263,345 18,420 :21.173 425,733 1.116,372 1,478,033 1.488,541 1,649,732 1,047.508 648,072 135.505 8.112.088 This letter supplements my July 10, 1991 testimony before the Subcommittee regarding BankAtlantic Financial Corporation ("BankAtlantic"). The Subcommittee requested additional information on the following two questions: (1) "During the time Mr. Levan acted as general partner of In response to this question, the staff of the Division of Corporation Finance has reviewed the public filings made by the four limited partnerships involved in the second BankAtlantic roll-up transaction and the December 31, 1990 annual report on Form 10-K filed by BankAtlantic. Based on the disclosures in the these documents, the staff has generated a detailed analysis of the fees and reimbursements paid to affiliates during the life of the partnerships. A copy of that analysis is attached to this letter. It appears that the managing general partner for all four limited partnerships is an indirect wholly owned subsidiary of BankAtlantic, which is in turn controlled by Mr. Levan, who owns -46.1% of BankAtlantic's common stock. Mr. Levan also apparently served as an individual general partner of each the limited partnerships. Accordingly, transactions between the partnerships and BankAtlantic, Mr. Levan, or other entities with which he is affiliated, are related party transactions that must be disclosed pursuant to Item 13 on Form 10-K. |