The Preston report scrutinized eight thrifts, disclosing new, damaging information about two of them: First Maryland and Friendship savings and loan companies.
First Maryland, a Silver Spring association now under state control, committed "flagrant violations" of regulations, making more than $13.7 million in loans to businesses controlled by First Maryland officers or their relatives.
Government examiners in 1983 and 1984 found incomplete mortgage files, $12.5 million in delinquent mortgages, a series of "ill-advised, unsafe" loans and an $801,200 unsecured loan to a partnership controlled by First Maryland President Julian M. Seidel and other officers.
Seidel could not be reached for comment today.
Friendship of Bethesda, sold late last year to Chase Manhattan Corp., "exemplifies some of the worst problems" faced by government regulators.
E. Mitchell Fry Jr. and Anthony C. Koones, Friendship's controlling officers, established a parent company that "was used to divert" about $3 million to benefit themselves and other "insiders."
In one transaction, Fry directed the thrift's real estate broker to pay $361,339 to the parent company he and Koones controlled. Preston said the sum was paid "apparently for no services whatsoever."
In addition, Friendship painted for regulators a "false picture of financial health" by using "deceptive accounting practices," including a 1982 trade of batches of home loans with Old Court Savings & Loan.
Neither Fry nor Koones could be reached for comment.
Friendship ceased to exist last November when Chase Manhattan Corp. acquired it and two other thrift associations.
Community Savings & Loan of Bethesda diverted funds to parent companies that then paid out huge amounts to the owners of Community and the parent companies, Tom J. Billman and Clayton C. McCuistion.
The two men received more than $15 million in dividends from Community between March 1983 and March 1985. The dividends' "cumulative effect" was "to impair the safety of depositors' accounts," the report said.
Preston cited "the cavalier way that the dividends were approved," and said that Community officials claimed that the minutes of a 1985 board meeting that approved $6.7 million in dividends were "lost."
Billman could not be reached for comment and McCuistion declined to comment. The state took over Community last September because of its financial weakness.
Ridgeway Savings & Loan, which is under state control; Merritt Commercial, which was acquired by Chase Manhattan; Sharon-Security; and two thrifts formerly controlled by Jeffrey A. Levitt, Old Court and the now-defunct First Progressive Savings & Loan, were also cited for operating problems.
The report mentioned details of numerous allegedly improper activities by Levitt, including an allegation by a First Progressive customer who said that, when he applied for a loan, Levitt demanded $5,000 for himself "for putting the loan through."
The borrower complained to state regulators that at settlement, "Levitt did not turn over the entire proceeds of the loan."
A formal complaint was filed against Levitt with a state-run attorney disciplinary commission, but the commission took no action against Levitt, Preston said.