Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, April 18, 1991                   TAG: 9104180208
SECTION: BUSINESS                    PAGE: B-5   EDITION: METRO 
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE:                                 LENGTH: Medium

CHARTER-U.S. DISPUTE HEADS TO COURT

The Bristol firm's arguments concerning 1982 and 1985 mergers will be heard by U.S. District Judge Glen Williams in Abingdon. A hearing had been scheduled for April 24 on Charter's suit for a restraining order against two federal agencies to prevent the appointment of a receiver for the firm.

Charter said the government breached the earlier contracts by refusing to allow $48.2 million in good will from the mergers to be considered assets. As a result of that refusal, the Office of Thrift Supervision disapproved Charter's capital plan, raising fears of a government takeover of the thrift.

Good will is the difference between what a buyer pays for a company and the value of its hard assets such as buildings and equipment. The gap typically reflects the value that intangible assets make to the business's worth.

The case was continued by Williams after the Office of Thrift Supervision and the Federal Deposit Insurance Corp. asked the judge to dismiss the action or transfer it to U.S. Claims Court.

Charter's lawyers have filed opposing briefs, saying that Williams should grant a permanent injunction and enforce the contracts. The contracts involve Charter's acquisition of thrifts operating with a negative net worth.

Thomas Buchanan, a Charter lawyer, said the thrift's operations will continue unchanged pending a decision in the case.

Charter maintains the government agreed in the contracts to allow part of the assets of the weak firms to be set aside as good will when Charter acquired them through merger.

The acquisitions "were done at the behest of government agencies in their attempt, nationwide, to use strong institutions such as ours to resolve the problems created by failing institutions," E.L. Byington Jr., Charter chairman, said in his company's annual report.

When Charter sued the agencies in February, the firm said it feared that disapproval of its capital plan would lead to a federal prohibition against new loans or investments and other restrictions.

In a March hearing, a government lawyer said a 1989 law passed by Congress changed the rules for good will in financial institution matters. This was countered by Charter's position that the government should "live by a contract like everybody else."

If the judge finds the contracts are valid, Buchanan said, he could order them to be enforced, along with the good will provisions. If Williams finds the agreements are not valid, Buchanan said, "he could unwind the mergers."

Charter was formed in 1982 by the merger of First Federal of Bristol, a healthy thrift, with Peoples Federal Savings and Loan of Roanoke and First Federal of New River Valley. The latter two firms both were operating with negative net worths. Charter had to write off bad credit accounts acquired from another firm in Tennessee.