Ronson and UK's top fund manager sued in US

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GERALD RONSON, founder of the Heron empire, and Hugh Jenkins, Britain's top fund manager, are being sued by a US federal agency.

Resolution Trust Corp, the body set up by the US Government to sort out the mess left by the collapse of America's savings and loans industry in 1989, has issued civil proceedings against 19 defendants in Arizona. A copy of the writ, which was issued last month, has been obtained by the Independent on Sunday.

The claim relates to Pima Savings & Loan, purchased by Heron in 1980. Mr Ronson sat on the Pima board and its powerful directors' loan committee from February 1981 until the S&L - similar to a UK building society - failed in March 1990.

Mr Jenkins, who now oversees an estimated pounds 60bn worth of funds at the Prudential, also sat on the Pima board and committee from February 1985 to May 1986. Along with Mr Ronson's fellow Heron director Alan Goldman, they are the only Britons named in the action.

Pima grew rapidly under Mr Ronson's stewardship, moving away from stable home loans into high-risk commercial lending. Hundreds of other S&Ls across America adopted a similar course - and also came to grief. Heron tried to find a buyer for the business in 1990 but when that failed, Pima was taken over by an official agency and later went into receivership. In its 1990 accounts, Heron reported a loss from discontinued businesses, mainly Pima, of pounds 193m.

Resolution alleges that between January 1981 and March 1990, the defendants 'engaged in a pattern and practice of wrongful conduct . . .'

Resolution claims that in 1982 Pima 'altered its primary business philosophy and embarked on an aggressive strategy of rapid growth to achieve a high return on assets'. This sudden change 'took place in a climate of either non-existent or poorly written lending policies and underwriting practices'.

The defendants are accused of 16 different types of breach of their duty as directors. These include: failing to develop and enforce prudent and proper procedures; not keeping adequate records; repeatedly recommending and approving imprudent loan extensions and modifications; granting additional credit to borrowers in clear financial difficulty; not ensuring that lending officers remained independent and free from pressures from executive officers of Pima; failing to exercise independent judgement in reviewing loans; and ignoring warnings from state and federal regulators. The claim goes on to list what it says are specific examples of these breaches, totalling dollars 83m ( pounds 56m).

In April this year, Heron agreed a restructuring with its bankers. Under that deal, Mr Ronson, who went to jail for six months for his part in the Guinness affair, is on a pounds 5m contract spread over five years.

A spokesman for Heron said that Mr Ronson would fight the Resolution claim. 'The former directors of the company are confident that the affairs of Pima were conducted prudently and in accordance with both federal law and general lending practices.'