North American Savings and Loan was founded in 1983 by Duayne Christenson, a dentist. When not pulling teeth, Christenson would make real estate investments on behalf of relatives and his girlfriend. (Time, June 20, 1988.) Christenson, "tired of begging for loans from straight laced thrift officers," opened his thrift in Santa Ana, California. Married and with children, Christenson had undergone some sort of mid-life crisis it seems and had "taken up with a flashy real estate lady" from Oak Grove, California, named Janet F. McKenzie. (Pizzo, page 22.)
Very soon thereafter, both Christenson and McKenzie began investing the thrift's deposits in real estate projects that had been grossly over-appraised and in which both were holding indirect interests. One project in particular, which had been earlier acquired for $4 million, Christenson and McKenzie "sold back and forth to artificially increase (the project's) value to $40 million" as reported by regulators later. (Pizzo, page 22.)
To get around Federal laws that prohibited thrifts lending to their own owners and officers, Christenson would use nominee loans and so called straw borrowers – someone to stand in place of himself for a loan, but in name only. "In one typical scheme," wrote Calavita, Tillman and Pontell, "straw borrower David Morgan purchased property brokered by McKenzie's real estate company and financed by North American. He (Christenson) then resold the property at an inflated value to his own holding company." McKenzie's company made excellent commissions, North American booked profits from the loan fees (paper profits, not cash) and Christenson had control of yet another property loan.
In 1989, McKenzie and four others were indicted on charges of racketeering after their thrift collapsed in June of 1988. A $209 million reimbursement to insured depositors was necessary. As regulators went in to check the books they found evidence of "fake certificates of deposit, forged bank confirmation letters and other cover-up materials." (Calavita, page 19)
Christenson himself was killed the day before regulators seized the thrift in a mysterious car crash, leaving McKenzie as sole beneficiary of a $10 million life insurance policy.
Follow up references:
Calavita K., Tillman R. and H. N. Pontell, The Savings and Loan Debacle, Financial Crime and the State, Annual Review of Sociology. Vol. 23, 1997.
Pizzo, Stephen, Inside Job: The Looting of America's Savings and Loans, McGraw Hill Publishing Company, 1989.
Too far gone to bring back, Time, June 20, 1988.
Copyright: Phil Anderson, 2004