The special counsel who investigated Maryland's savings and loan crisis has recommended to Gov. Harry Hughes that the state initiate a half dozen civil suits against individuals and institutions associated with the year-long crisis, including Gerald Klein, the former owner of Merritt Commercial Savings and Loan, and the Baltimore law firm of Venable, Baetjer & Howard.
In a six-page letter to Hughes that formally closed his 10-month investigation, special counsel Wilbur D. Preston Jr. also reported that his office has recommended that the governor seek criminal investigations of a total of 33 persons in addition to those already being probed for their association with the Old Court Savings & Loan Association of Baltimore.
Neither Preston nor Hughes administration officials would reveal any specifics of the criminal or civil actions sought by the special counsel, but other sources said that at least some of the individuals recommended for criminal investigation were associated with some of the five thrifts beside Old Court that are being probed by state and federal authorities.
Venable, Baetjer & Howard, one of Baltimore's most prestigious firms, was sharply criticized in Preston's original 457-page report issued to the governor and legislature in January for its dual representation of Old Court and the insurer of 102 state-chartered thrifts, the Maryland Savings-Share Insurance Corp. (MSSIC).
Preston, in recommending civil action against Klein, according to one source, found a loophole in an agreement under which Merritt was sold to the Chase Manhattan Corp. The agreement, approved by the legislature last October, appeared to rule out any state civil suits against the former thrift owner.
But according to the source, the terms of the sale prevented state suits only against officers and directors of Merritt, and Klein was neither for a period of about a year before the thrift crisis.
Also in his final report delivered to the governor today, Preston revealed for the first time allegations by an attorney for three Baltimore County thrifts that he had warned Attorney General Stephen H. Sachs of troubling practices by some high-flying thrifts in May 1984, a full year before depositor runs brought the crisis to a boil.
The attorney, E. Scott Moore, told Preston that he voiced the warning to Sachs at a banquet held by the Maryland Hospital Association where the attorney general was the featured speaker. Moore told Preston that he spoke to Sachs of his generalized concerns about the interest rates offered by four institutions, their advertising practices and some of their investments.
Sachs told Preston and a group of reporters today that he had no recollection of the warnings supposedly issued by Moore, who during the mid-1970s served as a director of MSSIC.
The attorney general, a Democratic gubernatorial candidate who has been sharply criticized by his chief opponent, Baltimore Mayor William Donald Schaefer, for not preventing the thrift crisis, went to extraordinary lengths today to soften additional criticism stemming from Preston's supplemental report.
Sachs released the Preston supplement today in an attempt, he said, to avoid a repetition of premature and inaccurate press accounts before the public release of the counsel's original report in January. Those accounts speculated incorrectly that the attorney general would be singled out for sharp criticism.
Today, Sachs said he remembers "absolutely nothing" of the comments reported by Moore, who was out of town and unavailable for comment.
"I cannot say he didn't make them, I cannot say it didn't happen, I can only say they simply, flatly, did not register with me," said Sachs, suggesting as a possible explanation that he was distracted by his upcoming speech that night and other conversations at the table where he sat.
Sachs also said that two months before the conversation reported by Moore he had asked MSSIC about press accounts hinting of trouble in the industry and been assured that the thrifts were sound.
Sachs predicted that Schaefer would make "political hay" of the new report, but said "people will look at the facts and realize this for what it is and what it isn't."
Contacted by phone, Schaefer repeated past criticisms that Sachs had been in a position to prevent the crisis and had not.
Critics have said that Sachs, as attorney general, could have launched an investigation of the thrift industry before the crisis began.