The Board of Calvert County Commissioners chose Douglas A. Parran Jr. as the county's top administrator last week without a formal briefing or discussion about federal regulators' allegations in the 1990s that he contributed to the collapse of an Annapolis savings and loan.
Commissioner Susan Shaw (R-Huntingtown) said she was outraged that Parran, who is scheduled to serve as interim county administrator for at least 15 months starting Saturday, did not inform the board about the controversy over the collapse of the savings and loan.
"It should have been clear to all of us," said Shaw, adding that she only learned about the controversy Wednesday, from a person, whom she declined to identify, who raised concerns about Parran's background.
In an interview Thursday, Parran denied any wrongdoing during his time as president of First Annapolis Savings Bank and said the federal government caused the bank's failure when it rewrote regulations governing savings and loans.
"They changed the rules," said Parran, 60, of Lusby. "They basically did something that was illegal."
Although the controversy was not discussed when the board selected Parran in a closed-door session Tuesday, Commissioners Gerald W. Clark (R-Lusby) and Wilson H. Parran (D-At Large), who is not related to Douglas Parran, said they were previously aware of the matter.
Both said they did not consider the issue relevant and praised Parran's performance for more than a decade as director of general services, the county's largest department. They also said he regularly fills in when the current administrator is on vacation.
"I think he'll do a great job," Clark said. "He's a great manager and has the respect of all the employees and people in county government. . . . As far as I'm concerned, the man's reputation is beyond reproach."
The federal scrutiny of Parran centered on his work at the First Federal Savings & Loan Association of Annapolis, where he was a senior manager and director in the 1980s, a time when savings and loans throughout the country were affected by bad loans that led to the financial collapse of many such institutions.
In 1988, Parran became president of the institution, which was renamed First Annapolis Savings and converted to a stock-based institution. He said federal regulators asked him to head the bank.
But Parran said it was impossible for the bank to survive after Congress passed a law in 1989 -- the Financial Institutions Reform, Recovery and Enforcement Act -- that changed the operational requirements and contracts for savings and loans.
"We had a real contract and were living up to the terms of that contract," he said. "They changed the rules."
Parran resigned from the bank in March 1990. A few months later, it was taken over by federal regulators, and its assets were transferred to a new institution named First Federal Savings Bank of Annapolis.
Federal regulators accused Parran of contributing to the bank's collapse. In a 1993 civil consent agreement with Parran, the U.S. Office of Thrift Supervision alleged that he "participated in unsafe or unsound practices" in conducting the business of First Annapolis and cost the bank more than $3.3 million by violating a previous agreement the bank had with regulators.
As part of the 1993 agreement, Parran agreed to pay $10,000 and not "participate in any manner" in the affairs of federally insured banking institutions without special permission from regulators. Parran, who said the OTC allegations against him are false, said he agreed to the settlement to save legal fees and move on with his life.
"The only thing that I wanted to do is put the matter behind me," he said.
Parran said he stepped down from his job as vice president of Maryland Bank and Trust as the agreement was being finalized and then developed a 35-unit subdivision in Solomons. In 1995, he was hired by the county as director of general services.
But at the same time he was battling a 1993 civil lawsuit from the Resolution Trust Corp., a federal agency that oversaw the bailout of failed savings and loans, which accused Parran and seven other bank officials of "unsafe, unsound and reckless lending policies and practices" that cost the bank more than $20 million.
In 1996, a federal judge ruled in favor of Parran and the other banking officials. According to an account in the Daily Record, a publication that covers Maryland's business and legal news, U.S. District Judge J. Frederick Motz said the agency had failed to produce expert testimony proving that real estate projects approved by the bank were improperly underwritten.
"I do not know why it is that the [agency] did not retain any underwriting experts in this case," the newspaper quoted Motz as writing in his decision. "It may have been due to (1) strategic error, (2) an inability to find an underwriting expert who would testify to the fact that the target loans were improperly underwritten, or (3) a desire to try the case on the cheap.
"However, at the least a defendant officer or director facing multimillion-dollar liability is entitled to be confronted with competent evidence that in fact a misjudgment was made," he wrote.
Clark and Wilson Parran said they hoped that Douglas Parran would become a candidate to hold the county administrator job permanently when the next board takes office after the 2006 commissioner elections. Clark said renewed attention about Parran's involvement in the savings and loan was prompted by people with political agendas.
"It sounds to me like there is somebody out there who is trying to embarrass the board," he said. "It's just silly. It's just some political hack."
Shaw said she has no concerns that Parran's involvement in the savings-and-loan controversy will affect the operation of county government.
"Am I worried about it? No. Because we have a lot of redundancy and safeguards in place," she said. "But do I think that should be a factor in the long-term selection [of an administrator]? Absolutely."
Staff researchers Bobbye Pratt and Richard Drezen contributed to this report.