The former owner of a failed Texas savings and loan institution was indicted by a federal grand jury yesterday that accused him of using thrift funds to make illegal campaign contributions, hire prostitutes, finance his hunting trips and rent a beach house.
Justice Department officials characterized the 38-count indictment of Don R. Dixon as the government's most significant case since a special task force began investigating fraud in Texas thrifts 2 1/2 years ago. Dixon operated the now-defunct Vernon Savings & Loan, the eventual collapse of which cost taxpayers $1.3 billion. When the government took over the institution, 96 percent of its loans were bad.
The thrift gained national attention in 1987 after Jim Wright, a Texas Democrat who was then House speaker, tried to intervene with federal regulators investigating the S&L. Wright acted at the urging of then-Rep. Tony Coehlo (D-Calif.), according to a report to the House Ethics Committee by outside counsel that investigated Wright.
The outside counsel, Richard J. Phelan, wrote that Wright took Dixon's case to the Federal Home Loan Bank Board "without even performing a rudimentary investigation of Dixon's dispute with the bank board or the legitimacy of the request."
Phelan recommended that Wright be disciplined, but the House Ethics Committee rejected the recommendation.
Seven of the thrift's highest officers and a major borrower already have been convicted of defrauding the institution.
Dixon, a real estate developer turned thrift owner, was charged with conspiracy, misapplication of funds, making false statements and false entries and interstate travel in aid of racketeering. His attorney did not return phone calls for comment.
The indictment alleges that Dixon instructed Vernon officials to contribute to the campaigns of 13 candidates, then reimbursed them with expense money. The candidates did not know the contributions were illegal, the indictment states.
Dixon hid rental payments for his beach house in California as thrift consulting fees, according to the indictment.
And on three occasions, he spent thrift money on prostitutes, including $10,500 for women for a board of directors party in June 1985, the indictment alleges.
He was accompanied on pheasant hunting trips -- paid for with thrift funds -- by the head of the state's main regulatory agency for S&Ls, according to the indictment.
The charges against Dixon carry a maximum prison term of 190 years and a fine of up to $9.5 million.
Attorney General Richard Thornburgh said in a prepared statement that the indictment shows "these complicated white-collar crime cases take time to develop, but the Justice Department is committed to the investigation, prosecution and incarceration of those who ripped off our financial institutions and left the taxpayers holding the bag."
Dixon is also the lead defendant in a civil suit filed by the Federal Savings and Loan Insurance Corp., which alleges that top thrift officials looted Vernon "for their personal financial benefit."
Vernon has been held up as as one of the worst examples of abuse at S&Ls. After Dixon bought it in 1982, the thrift bought a hunting club and a luxury yacht, spent $6 million for a fleet of five planes and hired six pilots and paid $22,000 for a "Gastronomique-Fantastique" dining spree throughout Europe. Regulators also discovered the thrift owned 17th-century castle doors.
The entertainment and expense tab at the California beach house, where Dixon and his wife lived for 18 months, totaled $761,000.
In another fraud case involving a Texas financial institution, a federal judge Tuesday sentenced Homer Taylor, the former president of National Bank of Texas, to 12 years in prison. He was also ordered to pay $19,000 in restitution to the Federal Deposit Insurance Corp.
Taylor was convicted of a scheme in which others obtained loans from the bank at his direction and then transferred the loan proceeds to him.