American S&L; Official Cited in Illegal Trading

For the third time in a month, the Securities and Exchange Commission charged an official or former official of American Savings & Loan Assn. with illegal insider trading in the stock of the S&L;’s parent company, Irvine-based Financial Corp. of America.

The SEC on Monday said Frank M. Rummonds, until recently American S&L;’s treasurer, sold 6,750 shares of FCA common stock in February, 1985, after he had learned that the company soon would report a huge loss for 1984.

By acting before the news was made public, the SEC alleged, Rummonds avoided personal losses of $20,066.

As is often the case in such SEC lawsuits, Rummonds settled without admitting liability. However, he agreed to pay $20,066 to the agency within 30 days and to pay a civil penalty of the same amount within 60 days.

Stripped of Titles

He also consented to a court order forbidding him from violating anti-fraud provisions of the securities laws in the future.

As a result of the SEC investigation and lawsuit, FCA in the last two weeks stripped Rummonds of his titles of senior vice president and treasurer at American Savings and transferred him to non-treasurer duties, said Layna Browdy, an FCA spokeswoman. She would not specify, however, what his new duties are.

Rummonds would not comment, though he allowed his secretary to confirm that he no longer held his previous titles or duties. His attorney, Alvin Fishman of San Francisco, would say only that Rummonds still was employed by American Savings in the S&L;’s Stockton headquarters.

2 Others Accused

On Feb. 24, the SEC charged FCA founder Charles S. Offer, who retired in 1977 but remained on the board, with illegal insider trading stemming from the 1983 merger of FCA and First Charter Financial Corp. As part of his settlement, Offer agreed to forfeit profits of $3,625.

On Feb. 25, the SEC charged former FCA General Counsel John J. Borer Jr. with illegal insider trading stemming from his sale of nearly 40,000 shares of FCA stock last winter after he had learned about the expected loss but before it was made public. He agreed to pay $115,070--half of it as a civil penalty--to settle the suit.

An SEC spokesman would not say if the federal agency plans to file any more suits against current or former FCA or American Savings officers.

The SEC claimed that the three men acted before FCA announced March 8, 1985, that it expected to report a year-end loss of $500 million to $700 million.

The next month, the once high-flying company confirmed that it had crashed in 1984, suffering the biggest annual loss--$590.5 million--in the history of U.S. savings institutions. The loss was blamed largely on bad real estate loans. In the summer of 1984, the SEC forced FCA to restate its quarterly net income to show a $107-million loss in the second quarter instead of a $31.1-million profit. The restated financial results sparked a large run on deposits.

At about the same time, the Federal Home Loan Bank Board forced FCA Chairman Charles W. Knapp to resign. His job went to William J. Popejoy, who merged the boards of FCA and its principal subsidiary, American Savings.