Beverly Hills Bancorp, parent company of Calabasas-based Bank of Beverly Hills, said today that it received a favorable ruling from an arbitrator in connection with the company’s dispute with a former officer, capping years of legal proceedings arising from accounting scandals that bilked millions from several pension funds. A former officer of the company, whose name was not disclosed in the announcement, had claimed Beverly Hills Bancorp was responsible for indemnifying him in the amount of $2 million he agreed to repay as a result of criminal proceedings against him connected to his role in the financial collapse of Capital Consultants LLC. The case stems from an SEC investigation of Capital Consultants, a Portland, Ore.-based investment advisory group that worked mostly with union pension funds, and its principals, Jeffrey L. Grayson and his son, Barclay L. Grayson, among others. The SEC charged, among other things, that Capital Consultants was involved in a Ponzi-like scheme to cover up losses from several bad loans, including a $160 million loan Capital Consultants made to Wilshire Credit Corp., according to SEC documents and other published reports. Wilshire Credit Corp., at the time headed by Andrew Wiederhorn, along with Bank of Beverly Hills, were both owned by Wilshire Financial Services Group, which, in 2004 sold off Wilshire Credit Corp. and changed its name to Beverly Hills Bancorp. As a result of the investigation, Barclay Grayson, who pleaded guilty to mail fraud in connection with the scheme, and Wiederhorn both received jail sentences, according to reports at the time. Weiderhorn was also fined $2 million, the reports and other documents said. Jeffrey Grayson pled guilty to two felony counts resulting from the charges, according to published reports. In 1998, Wilshire Credit Co., which was engaged in the secondary loan mortgage market, borrowed $160 million from Capital Consultants after some of the company’s international financial markets collapsed, according to SEC documents. The company defaulted on the loan, ultimately leading to the collapse of Capital Consultants, the SEC documents said. According to BHBC’s SEC documents, Beverly Hills Bancorp paid $15 million in settlement and other costs related to the scandal. The arbitrator dismissed the claim by the former officer and ruled that BHBC is entitled to recover legal fees and expenses. BHBC said it would record a reduction in legal expenses of approximately $700,000 accrued through March 31, 2006 for its second quarter.
