MONEY & BANKING: Rescue Operation

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MONEY & BANKING

In California's courts and press last week three hardheaded, self-made midwesterners were locked in noisy battle for control of the largest building and loan company in the U. S.—the $50,000,000 Pacific States Savings & Loan Co. The three battlers: 1) California's Building & Loan Commissioner Ralph Willard Evans, who fortnight ago took over Pacific States "to conserve and protect the investments of thousands of people"; 2) retired Millionaire Norman Waite Church, who was appointed custodian of the company; 3) ham-fisted Robert Stewart Odell, Pacific States' chief owner.

Robert Odell has the stature of a Wotan, the jowl of a bloodhound and a temper to match. An Iowa farmboy, he went to San Francisco in 1923, later set up as a mortgage broker in Santa Barbara. In 1927 he and some friends decided to acquire small, little-known Pacific States.

According to Commissioner Evans, who hails from Chicago, Odell & friends first acquired enough stock interest in Pacific States to have access to its list of investment certificate holders. Next they set up a company called State Guaranty Corp., peddled its preferred stock to Pacific States' certificate holders. Odell acted as fiscal agent, taking a 20% commission on these sales, thus getting enough money to purchase control of State Guaranty's common stock. And with the money it raised State Guaranty bought up all the capital stock of Pacific States.

By 1931 Pacific States' total assets had been built up to $103,000,000. Then came the mortgage crash and the company's management became "a rescue and rehabilitation operation." When Commissioner Evans jumped in last fortnight this "rescue operation" had cut Pacific States' outstanding investment certificates from $87,000,000 to $46,000,000.

According to Evans, Owner Odell made a practice of offering tenants of Pacific States Savings & Loan Co. properties as much as 20% reductions in their rents if they paid them through Pacific States Auxiliary Corp., another wholly-owned subsidiary of State Guaranty Corp. P. S. Auxiliary meanwhile bought P. S. Savings & Loan certificates in the open market at about 55¢ on the dollar, turned them over to P. S. Savings & Loan in lieu of the rent due. If carried through, this smart practice could have enabled Odell to buy in all the certificates, leaving himself owner of all the company's real estate (now valued at $33,000,000).

To these charges Robert Odell had last week made no direct answer. Instead he brought a spectacular counterattack. He claimed that Commissioner Evans is a political minion of Governor Olson and that they are ganging up on him because he did not contribute enough to their 1938 campaign fund. He based this in part upon the appointment of Norman Church as Pacific States' custodian.