American Savings files
suit against brokerage

---

By Dave Segal
Star-Bulletin

American Savings Bank, which took a $3.8 million write-down in the third quarter for four trust certificate securities it was not permitted to own, is attempting to negotiate a settlement with the seller of three of those securities, Paine Webber Inc., after having sued the brokerage.

The bank, a subsidiary of Hawaiian Electric Industries Inc., purchased a total of $114 million of the securities, also referred to as collateralized debt obligations.

But in June 2000 it was advised by the Office of Thrift Supervision that they were illegal investments under regulations governing federal savings banks.

The three securities purchased from Paine Webber totaled $84 million.

The lawsuit, filed Feb. 12 in the State of Hawaii circuit court, does not include the seller of the fourth security, First Union Securities Inc., which is a subsidiary of First Union Bank. Negotiations are ongoing with that broker concerning the purchase of the one $30 million security.

"Our allegation is that what (the brokerages) sold us we were not allowed to own, they had a fiduciary responsibility not to do that, and they should give us our money back," said Robert F. Clarke, chairman, president and chief executive of Hawaiian Electric Industries Inc.

The securities purchased by American Savings Bank are rated AAA as to principal repayment but not rated as to interest. The lawsuit against Paine Webber asks for rescission of the sale transactions, for monetary damages, and other relief.

Harris Weinstein, an attorney out of the Covington and Burling law firm in Washington, D.C., has been handling the negotiations with Paine Webber's New York office.

Attempts late yesterday to reach Weinstein and Paine Webber were unsuccessful.