Attorney General Stephen H. Sachs, appealing to the General Assembly today for broad new powers in his inquiry into a foundering savings and loan association in Baltimore, announced that the U.S. attorney for Maryland will soon join that investigation.
Sachs, making his first formal appearance ever before two legislative committees, said he held two "substantial" meetings with U.S. Attorney J. Frederick Motz in the past two weeks to outline a "joint federal-state approach" to investigate the origins of the crisis of confidence that shook Maryland's $9 billion thrift industry two weeks ago.
Motz, whom President Reagan has nominated to become a federal judge, issued a statement in Baltimore, saying, "There appears to be a federal as well as state interest" in the investigation that Sachs' office has pursued for three weeks since its authorization by Gov. Harry Hughes.
Meanwhile, Gov. Harry Hughes lifted withdrawal restrictions today on deposits in 13 more savings and loan associations, including Presidential Savings and Loan in Bethesda. The restrictions that Hughes imposed May 14 on the state's 102 privately-insured thrifts limiting withdrawals to $1,000 per month on each account have now been lifted at 47 of the institutions.
One of those, Chevy Chase Savings and Loan, the second largest in the Washington area, freed itself of the restrictions when it won approval for federal deposit insurance Monday, and the restrictions on the rest were lifted by Hughes on the recommendation of federal auditors.
In another development, the Baltimore Evening Sun reported today that Fairfax Savings Association, a Baltimore thrift with assets of $552.2 million, has filed suit against the now-defunct private insurer of the 102 Maryland S&Ls, accusing it of intentional mismanagement, breach of contract and fraud.
Fairfax Savings maintains it agreed to keep $20 million in certificates of deposit it had in Old Court Savings and Loan Association in Baltimore at the request of officials of the Maryland Savings-Share Insurance Corp., the private insurer, just prior to Old Court's problems becoming public. MSSIC officials promised to guarantee the funds, the suit contends.
The lawsuit was filed last week but was sealed by Baltimore Circuit Judge Joseph H.H. Kaplan, who said it would be damaging to the public interest, the paper said.
Fairfax charges that MSSIC knew of Old Court's management and financial problems when it made its request, but failed to disclose these facts in order to convince Fairfax to keep its $20 million in Old Court, the Sun said.
When Old Court was placed into conservatorship and MSSIC was named the conservator, stringent requirements were placed on withdrawals and this in effect froze Fairfax's funds on deposit, the paper said.
Sachs said he contacted the U.S. attorney's office to join the investigation because there is an "out-of-state dimension to the lines of inquiry -- the transactions reach other states." He also said the probe could involve allegations of mail fraud, an area in which federal prosecutors have expertise and jurisdiction.
The investigation thus far has focused on business practices by officers of Old Court, where reports of mismanagement sparked a massive run by depositors earlier this month. Those reports touched off similar runs of withdrawals at other associations and prompted an emergency session of the General Assembly to deal with the crisis.
The General Assembly is scheduled to resume its special session next Tuesday to consider legislation to grant Sachs' office the right to confer limited immunity from prosecution on witnesses prepared to testify against Old Court officers or employes.
Sachs today called the prerogative to grant immunity "the single most important tool in investigating white collar crime -- crime in the suites as opposed to the streets."
However, members of the key Senate Judicial Proceedings Committee and House Judiciary Committee and other legislator said they wanted responsibility for investigating Old Court be turned over to the office of the state prosecutor because of Sachs' ambition to become governor next year.
"The issue has become so politicized . . . by gubernatorial politics," said Del. Howard P. Rawlings (D-Baltimore). Rawlings, who sponsored legislation to grant Sachs the new immunity power, as well as power to issue subpoenas in the Old Court investigation, later filed an amendment to his bill shifting responsibility for the inquiry to State Prosecutor Stephen Montanarelli.
The presiding officers of the House and Senate, who met with Hughes and Sachs for two hours this afternoon, said they would have to review the results of today's hearing with their committee chairmen before deciding whether to send the volatile issue to the full assembly on Tuesday.
Senate President Melvin A. Steinberg (D-Baltimore County), who has already publicly stated his preference for an investigation conducted by the state prosecutor rather than Sachs, said the immunity issue -- with its political overtones -- could torpedo what has been a successful special session dealing with the savings and loan crisis.
"What disturbs me is the political perception," said Steinberg. "You are talking about credibility."
Testifying before the legislative committees today, Sachs strongly rebutted any suggestion that his gubernatorial ambitions would interfere with an impartial and aggressive investigation of possible savings and loan abuses.
"I don't know anyone who says I haven't surrounded myself with excellent staff . . . that acts in the best interests of justice, political considerations aside," said Sachs.
Talking to reporters later, Sachs said, "There are some people who see politics under every bush. I'm think I'm entitled to the presumption of innocence based on my record."
However, Sachs did say he shared the concern of Steinberg and House Speaker Benjamin L. Cardin (D-Baltimore) that the immunity legislation may be "too controversial to be dealt with at the special session." Sachs said he is anxious that the immunity legislation not provoke an "acrimonious and prolonged" debate.
In response to suggestions from the committee today that passage of the immunity legislation would send a signal that he had gained politically at the expense of Cardin, who is also running for governor, Sachs responded that such "political chatter" is inevitable.
Taking the investigation out of his hands, Sachs added, would "send a signal that all politicians can't be trusted . . . . I beg you not to do that." He also said that any suggestion that Cardin, whose first cousin is a principal in Old Court, is "touched by these events is outrageous."
Cardin, Steinberg and the chairmen of the legislative committees met for more than two hours tonight but failed to reach a consensus on how to deal with the ticklish political problem of the immunity legislation and whether the attorney general is the proper official to investigate Old Court.
"We just don't know what's the best thing to do," said Steinberg. "It's a very complicated area," added Cardin, who said the legislative leadership would meet again on Monday to forge a common position prior to the continuation of the special session on Tuesday.
In a related development today, four more Maryland savings and loan associations, all of Baltimore, received conditional approval for federal insurance from the federal home loan bank board. They are: Vanguard Savings and Loan, with assets of $9.3 million; Kopernick Building and Loan, with assets of $6.6 million; Kosciuszko Permanent Loan and Savings Association, with assets of $4.2 million and Midstate Savings and Loan, with assets of $33.7 million.