Black Bart's Red Ink

Bart Lytton, 55, mercurial multimillionaire boss of Los Angeles' Lytton Financial Corp., has never been noted for modesty. "I am the most successful businessman in this decade in the U.S.," he once observed. "The only ism for me is narcissism. If I cared about my image, I'd never do the gutty things I do, or say the things I say. The day I turn mellow, I hope they melt me."

Lytton has made a career of living up to that flamboyant self-assessment. While competitors derisively nicknamed him "Black Bart," and grew apoplectic at his unbankerlike antics, he built his savings and loan holding company from a 1958 midget into a $685 million-asset mammoth, fifth largest in the U.S. And he burnished his status by becoming a patron of the arts, a party-giving friend of Presidents Kennedy and Johnson, and state finance chairman (from 1958 to 1962) of the Democratic Party.

Too Little Cash. Last week Lytton's empire was teetering on the edge of a financial crisis that could well lead to its founder's ouster. With $2,800,000 in debts coming due by May 1, Lytton Financial found itself with too little cash on hand or in sight to repay its creditors. The company owes $1,600,000 to the United Automobile Workers Union on a note bearing a payment date that has already been postponed from April 2 to April 25. It owes another $1,200,000 to a group of institutional investors, including Investors Stock Fund Inc., a mutual fund managed by Minneapolis-based Investors' Diversified Services. In a report Lytton has just distributed to its shareholders, accountants warn that Lytton Financial's continuance "as a going concern" requires "additional financing or modifying existing agreements."

Lytton's predicament arises partly from events beyond his grasp, partly from his own reach. He has been reaching ever since he arrived in California with $30 in his pocket in the late '30s. He wrote radio-and screenplays ("I'm a lot prouder of some of the mortgages I've written," he says), then took on an advertising job for a mortgage broker. Later, when he moved into S&Ls, Lytton quickly proved himself a master of theatrical dazzle as he wooed savings accounts. He held art auctions and book fairs, gave away coffee and cake, loaded his sumptuous offices with endless tables of free gifts for new customers. When Washington stopped him from advertising such come-ons, Lytton responded by hiring luscious models to wrap gifts in a traffic-stopping display behind the windows of his Sunset Boulevard office.

Too Much Credit. The big trouble was that money flowed in at a rate that strained Lytton's ability to invest it profitably. The collapse of the Southern California real estate market hit Lytton Financial hard, forcing its two subsidiary S&Ls to dispose of $56 million worth of foreclosed property in 1966 and 1967 at a loss of nearly $11 million. They still have $46 million more of foreclosed property on their books. To keep the capital reserves of the subsidiaries at the required level, Lytton borrowed through his holding company and lent them the money. Even so, those reserves last year fell close to the 5% called for by law. At that point, state and federal authorities forced Lytton to hand over $45 million of savings accounts (along with an equal amount of loans with good repayment records) to two competitor S&Ls. At the same time, the authorities blocked Lytton from using profits of the subsidiary S&Ls to meet his holding-company debts. Plans to raise $12 million capital in the stock market went awry. To raise funds to satisfy personal creditors, Chairman-President Lytton last month sold 60%--$2.1 million worth--of his stock in Lytton Financial, reducing his holding to about 8%.

Says California S&L Commissioner Preston Martin: "Lytton is such a good promoter that he promoted himself right into trouble." Happily for 175,000 depositors, the woes of Lytton Financial do not involve the subsidiary S&Ls, says Martin. Even if they did, the Federal Government stands behind every savings account with $15,000 insurance.

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