A former thrift owner said he didn't think he deceived depositors by accepting their funds in an institution that could soon close because he believed the state would back the $15,000 guaranty promised by the thrift's deposit insurer.

"It wasn't until a meeting with the governor that I realized the state wouldn't support the ILGC (Industrial Loan Guaranty Corp.) financially," said Larry Hendricks, former owner of Western Heritage Thrift and Loan and ILGC trustee.After that meeting with Gov. Norm Bangerter when it was apparently made clear the state was not liable for the ILGC's losses, Western Heritage and six other thrifts were placed under state control and the ILGC, a private insurance fund created by the Legislature in 1975 to guarantee thrift deposits up to $15,000, was declared insolvent and taken into receivership on July 31, 1986.

Five of those thrifts, including Western Heritage, with about $100 million in deposit liabilities are being liquidated, and about 15,000 depositors stand to lose an estimated $38 million of their savings.

Hendricks told a legislative task force Tuesday that he was following orders from the state not to disclose to depositors the pending closure, but to continue operating. He said Western Heritage accepted between $300,000 to $500,000 in new deposits in a three-month period when he knew his company would be shut down by state regulators.

He recommended the task force hear from former thrift owners and trustees of the ILGC for their side of the story. "We lost our $550,000 investment when the thrifts were taken over. The owners were damaged too," he said.

The task force is investigating a solution and settlement to depositor claims filed against the state as a result of the thrift closures. A recommendation from the task force to Bangerter is due sometime in July.

Hendricks and business partner Kent Brown acquired Western Heritage in 1984 and soon after discovered the institution's deposit guarantor didn't have the resources to back up its $15,000 guarantee per deposit.

But, he said he "felt good about telling people their money was protected because I believed the ILGC had the full backing of the state."

When asked by the task force if he had investigated the ILGC's condition before he made the purchase, Hendricks said he didn't but relied on assurances from the Department of Financial Institutions and the ILGC that the fund was backed by the state.

He added that he thought the ILGC was set up the same way as federal deposit insurance funds, where they are not agencies of the government but are backed by the government's full faith and credit.

The ILGC was created by the Legislature in 1975 as a private non-profit corporation to insure deposits of the Utah's thrift and loans. Because of that connection and involvement by state regulators to rescue the deteriorating fund and its member institutions, lawsuits have been filed by depositors and Hendricks claiming the state defrauded them and has a legal responsibility to make them whole.

Because the ILGC is not a state agency the state has claimed no legal liability in the thrift industry collapse. However, a letter from former ILGC president Edward M. Jamison to Utah's Department of Financial Institutions indicate other ILGC trustees besides Hendricks believed the state was responsible for the fund's deterioration.

"The ILGC is essentially the handmaiden of the commissioner," Jamison wrote to former deputy commissioner of financial institutions George R. Sutton.

Jamison said the fund had no regulatory authority itself but functioned as a quasi-public entity under supervision of the state.

Documents recently released in a depositor lawsuit in federal court indicate ILGC trustees were working closely with the state to avert the thrift crisis months before it occurred.

A draft of the ILGC's 1986 public disclosure statement had the familiar "How Your Savings Are Protected" phrase deleted and replaced with a statement saying the unhealthy condition of the ILGC's members and the fund's past commitments has made the ILGC's guaranty "essentially worthless."

The pamphlet was never printed. Former financial institutions commissioner Elaine B. Weis told reporters Tuesday that it would have been a waste of $40,000 to print and distribute information that would have essentially accomplished what state officials had to do anyway: Shut down the ILGC and take over its member thrifts.