The land flip at State Savings of Salt Lake City

In 1977, San Francisco loan broker J. William Oldenburg bought 363 acres of land in California for $874,000 with a down payment of just $80,000. In 1979 an appraiser (real estate valuer) appraised the land's worth at $32.5 million. Three years later in 1982, the same appraiser was again asked by Oldenburg to value the 363 acres. The value now: $83.5 million. Now who in their right mind, you may well ask, would buy such a clearly inflated piece of acreage at that price ? Oldenburg supplied the answer.

The next year, 1983, Oldenburg was given approval to buy State Savings, a thrift in Salt Lake City, for $10.5 million, whereupon, a short time later, the thrift paid Oldenburg $55 million for the California property.

After a series of poor loans over the next several years, State Savings failed in 1985, with $416 million worth of deposits at the bank owing to depositors. This, the Federal government (through the FHLBB) was obliged to reimburse (up to a limit of $100,000 per depositor) since the deposits were federally insured.

Oldenburg was eventually indicted in February of 1989 for fraud.

Follow up references:

San Francisco Examiner, April 1984
Wall Street Journal, June 1984
Pizzo, Stephen, Inside Job: The Looting of America's Savings and Loans, McGraw Hill Publishing Company, 1989.

Copyright: Phil Anderson, 2004

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