On a February morning in 1984, seven men gathered at the McLean headquarters of Dominion Federal Savings and Loan Association to discuss one of the institution's most ambitious ventures: arranging a $97 million loan to finish the casino that Penthouse publisher Bob Guccione had long dreamed of building in Atlantic City.

Walking in and out of the meeting that day was an eighth man, William L. Walde, the hard-charging real estate genius who had overseen Dominion Federal's phenomenal first decade of growth. Walde saw the casino as a "fantastic" opportunity for his association, but other participants were so perturbed by Dominion Federal's conduct that one suggested Walde was not acting in good faith.

"Screw good faith," Walde shot back, according to the sworn testimony of one witness. "You're going to do it our way."

Although Walde vehemently denies making the comment, he was long accustomed to doing things his own way. And for 20 years his way worked fabulously, giving him one of the largest personal fortunes in his native Washington, D.C., and command of an S&L whose success was setting the pace for many others in the industry.

But even as Walde soared through the intensely competitive world of real estate finance, the man and his lending institution were earning another, less flattering reputation for ruthlessness, according to a review of confidential federal documents, court records and financial statements, plus interviews with more than 100 people familiar with Dominion Federal -- half of whom spoke only on the condition that they not be identified by name.

To his admirers -- corporate executives and real estate developers who have carried out multimillion-dollar deals with Dominion Federal -- Walde is an honorable banker with a Midas touch. "He has been, truthfully, as good as gold," said Mohamed Hadid, an area developer who has often turned to Dominion Federal for money.

But critics and industry officials tell a different story, pointing to numerous occasions when they say Walde and his institutions have reneged on loan agreements or imposed last-minute changes in terms on deals ranging from the smallest home mortgage to large commercial transactions. Some former clients claim that Walde undermined their projects to increase his profits. Meanwhile, records show, Dominion Federal's lending practices have drawn sharp criticism from federal regulators and prompted them to tighten their scrutiny of the S&L.

Most significantly, Walde's tactics in his negotiations with Penthouse over the casino project triggered a legal battle that today threatens to ruin Dominion Federal, Virginia's largest savings and loan.

Last summer, in a decision that stunned Washington's financial community, a federal judge in New York ordered Dominion Federal to pay Penthouse International Ltd. nearly $130 million in damages for "intentionally destroying" the casino project. The effect of the judgment was immediate: nervous customers pulled $125 million out of Dominion Federal in August and the value of the S&L's stock dropped by more than half.

If upheld in full, the huge judgment would wipe out Dominion Federal's $79 million net worth -- its assets minus its liabilities -- and in all likelihood force federal regulators to oversee the transfer of its accounts to another federally insured institution, according to the S&L itself.

Walde has launched an appeal to beat what he termed the "bad rap" of the Penthouse judgment. "I know that we will prevail," he said in a recent two-hour interview in his Tysons Corner office.

Dominion Federal's 47-year-old chairman flatly dismissed criticism of his business practices. "I'm not afraid of anything I've ever done," Walde said. "My whole life has been hard work and dedication.

"I'm sure that in the 20 years that I've been in the mortgage business, there is somebody out there that's had some association with me {who} must be mad at me," Walde added. "I'm positive that there's someone there. But I've always done what has been best in my fiduciary responsibility."

A Passion for Competition If Bill Walde has had a consuming passion in life, it's been competition. Whether playing a brutal game of "mud ball" with high school friends in Georgetown or later striking complex real estate deals around the region, Walde seemed to be a man driven by a need to win, according to his childhood friends and business associates.

"He lived every day like it was his last," recalled William Meyer, who knew Walde at the old Western High School in the late 1950s. "He was really anxious to get ahead. He was just going to make a lot of money, be a successful businessman and leave his mark on this town."

A chemist's son, Walde attended a number of local prep schools before graduating in 1966 from Southeastern University, a small business school in the District. He caught the real estate bug early: savings from part-time jobs, including one at the Georgetown Pharmacy, went toward the down payment on his first piece of property, a house in Glover Park that he bought when he was 21. Today, that property at 2233 39th Place NW remains part of a personal real estate empire of more than 50 houses and numerous apartment complexes, including several for low-income tenants.

"I saw different people in the Washington area make a very good living out of it," Walde said of his early attraction to real estate. "I just made my mind up -- I set a goal."

Walde first set his sights on his own neighborhood, where be bought, rehabilitated and rented out a number of aging houses. Walde's first full-time job -- as a loan officer in the Washington office of the Rouse Co. -- gave him entree to the big leagues of Washington real estate. It was at a party that Walde, then an energetic 26-year-old, met Lewis W. Russell, the head of a growing home-loan company called Virginia Mortgage and Investment Co. (VMI). Russell lured Walde away from Rouse and in February 1967 set Walde up in VMI's Kensington office.

VMI would never be the same again. In the space of 14 years, as he rose through the ranks of VMI until he owned a third of the company, Walde's energy and salesmanship transformed the small firm into one of the area's largest providers of home mortgage loans. In the seven years before Walde, VMI had issued a total of $8 million worth of mortgages; by the time Walde left, VMI had provided a staggering $800 million in mortgages to home buyers in Virginia, Maryland and the District.

In those early VMI days, the formula in mortgage banking was fairly straightforward. A mortgage banker would make a loan to a home buyer and then sell the mortgage to a savings and loan, collecting a certain percentage of the loan -- the "points" -- as the fee for his work. In a marketplace where attracting new mortgage applications often hinged on a loan officer's charm and attentiveness, a charismatic salesman like Walde had few peers.

"He would go over and above the extra mile to bring in business," said Mario T. Sasso, a mortgage banker who once ran VMI's Virginia operations. Walde regularly worked 18-hour days. He worked Saturdays and Sundays. There wasn't any place he wouldn't go to drum up business.

"You go out to the Realtor and you go to the man's house," Walde said. "You catch him in an airport, you make the loan 'app' in a car -- wherever it was that would satisfy the customer."

Stories about Walde's early work ethic and competitive streak still abound. Charlotte Wallace, a VMI loan officer, recalled Walde as being so consumed by business that he never noticed "when the elbows on his shirts were worn out." Once when he broke his ankle on a Monday morning, he showed up for business as usual at 2 that afternoon -- and went out in a leg cast looking for customers.

It was during these VMI years that Walde's tactics also began raising questions. Some real estate agents, colleagues and competitors from that era said Walde was sharply criticized at times for altering the terms of home loan agreements at the last minute, to VMI's advantage. Such changes were not unheard of in the business, but these critics said Walde was a master at extracting concessions from vulnerable would-be home buyers.

David L. James, who ran the Washington office of the Colquitt Carruthers realty company in the early 1970s, told of the time one of his clients was going to settlement on a house for which Virginia Mortgage was the lender.

According to James, Walde, the loan officer, had been assuring him, even up to a few days before settlement, that VMI would be charging four points. However, when James' client got to the settlement table, the closing attorney announced that VMI's charge would be six points. Having already sold his house, the now-frantic client had no choice but to accept the new terms.

But Julian Colquitt, James' boss, would not. Colquitt was infuriated by the switch, and he confronted Walde at the Bethesda headquarters of the real estate firm, according to James, who witnessed the meeting. Rejecting Walde's explanation that "the market had changed," Colquitt declared, "Look, I am not going to stand for this."

"If you tell my agents that the points are going to be such and such, I expect you to stand by it," Colquitt said, according to James. Walde then got out his checkbook and wrote a check for the difference, James added. Colquitt has since died.

James said the episode taught him a lesson about Walde: "I determined I would never do business with him."

Robert Kling, a local developer who did several deals with Walde and VMI in the mid-1970s, had a different kind of complaint. He testified that Walde's loan operation "seemed, to use the vernacular, to jerk things around," delaying the full funding of loans long enough to effectively earn some extra interest.

In most cases, "if the loan closed at Virginia Mortgage, I never got a check ... earlier than two weeks after settlement," Kling said in a 1984 deposition taken during a legal dispute with Walde.

Once, when Virginia Mortgage delayed funding a loan for an entire month, making it impossible for him to retire the previous mortgage on the same property, Kling complained directly to Walde. "I was getting upset because I was paying interest on my loan ... and he really didn't care," Kling testified. "He said, 'So what? I don't care. It's not my problem.' "

Walde could not recall the circumstances of the Colquitt episode, but he said it was not his practice to change loan terms without justification. What few problems he had were a drop in the bucket compared with the "hundreds and hundreds of millions of dollars" he was lending in those days, he said.

He also said, "I was never 100 percent perfect. If I made a mistake, I would have written a check out. I would have stood up and honored the deal if it was my fault.

"I did write some checks out and I would today," Walde said.

The Dominion Federal that Walde and Russell started in 1974 with a grubstake of $30,000 bears almost no resemblance to the $1.8 billion institution of 1988. Today, the S&L operates 55 offices along the East Coast, including new corporate headquarters in Fairfax County overlooking the Capital Beltway, and serves 150,000 depositors throughout the area. Back then, Walde had to settle for an office in a strip shopping center at Tysons Corner.

A Matter of Timing Still, Walde's timing in entering the S&L business could not have better.

The newborn Dominion Federal was poised to take advantage of an extraordinary local development, the suburban Washington real estate boom, and an equally dramatic change on a national scale, the upheaval in the once-staid U.S. savings and loan industry. What set Walde apart was that he recognized these changes early and worked tirelessly to exploit them.

"Walde didn't go along the traditional route of the industry. He's been 10 steps ahead of the industry," said William F. Sinclair, chairman of Washington Federal Savings Bank and a long-time Walde admirer.

Instead of running Dominion Federal the old-fashioned way, taking in deposits and issuing 30-year, fixed-rate mortgages, Walde operated the S&L like a big mortgage bank, making residential loans and quickly selling them on a fledgling "secondary" mortgage market of Wall Street investors and other financial institutions. Walde had a name for this game: "hot potato."

The appeal of this strategy was powerful. For one thing, the high-speed turnover of loans guaranteed Dominion Federal a constant flow of fee income -- fees for originating mortgages, fees for processing mortgage payments, even fees for promising to buy a mortgage. By relying more heavily on fee income than on interest from mortgages, as S&Ls used to do, Dominion Federal could also better shield itself from swings in interest rates that could depress the value of its loan portfolio.

In a sense, Walde had the best of two worlds: The mortgage banking side of Dominion Federal helped reduce his risk, while the traditional S&L operation gave him access to the capital he needed to grow.

By the end of the decade, his strategy was starting to bear fruit. With $84 million in assets, Dominion Federal was firmly entrenched in one of the country's most fertile banking markets. But Walde had grander plans. As he put it: "I wanted more."

Walde first wanted more of Dominion Federal, and in 1978 he split with Lew Russell, sold back his share of VMI and took over the association's top job. Then, in 1980, Dominion Federal sold shares to the public for the first time, raising more than $2 million in cash.

Walde used Dominion Federal's conversion to a public company to buy 10 percent of its stock and, over time, increased his stake to a controlling 44 percent interest. Not only was his personal fortune now tied directly to Dominion Federal's performance, Walde had a virtual free hand to set the S&L on a course of explosive growth.

Dominion Federal branches were soon popping up all over Virginia -- three one year, five another -- while mortgage offices were established in numerous southeastern states. The S&L's payroll swelled to more than 1,000 as Walde set up more than a dozen subsidiaries to handle a raft of related business -- from appraisals and development work to placing advertisements in the media. Before long, Dominion Federal was bragging about being the "Super S&L."

In fact, the association's performance was stunning. Loan volume doubled in one year, only to double again the next. Profits shot up steadily, from about $140,000 in 1982 to $3.5 million in 1983 and then to more than $11 million by 1984. Dominion Federal stock was suddenly hot property; after two stock splits, a share that in 1980 sold for just $13 was worth $625 at its peak in the summer of 1986, giving Walde on paper a personal stake worth more than $55 million.

Shifting to a New Field By the early 1980s, Walde's Dominion Federal was moving well beyond conventional home mortgage lending and into the more ambitious field of commercial and construction ventures. Shopping centers, office buildings in Arlington, condominium-hotels in Florida, housing subdivisions in Texas, an Atlantic City casino -- Walde's marketplace was not confined to inside the Beltway.

It was a glamorous line of business, one in which Walde could exercise his flair for deal-making to the utmost. Along with his subordinates, Walde would crisscross the Southeast and other regions of the country in the company's $1.8 million Beechcraft, inspecting construction sites and drumming up new business. "One of the first times I saw Walde was at a Christmas party, and he was late," recalled David May, a former Dominion Federal appraiser. "He and a buddy were out buying shopping centers."

Kent Sacher, Walde's pilot for 2 1/2 years, was in constant demand. "I was always on a beeper -- seven days a week, 24 hours a day," Sacher recalled. "We had no slow periods."

However, if the larger real estate projects offered Dominion Federal high returns, they also posed substantially higher risks. Every step in making a loan, especially those outside the S&L's home territory, was now more complicated, especially the all-important process of underwriting, or evaluating the odds of a borrower defaulting on a loan. If the underwriting was shoddy or incomplete, chances of a loan going bad increased exponentially.

The dangers were not lost on the government regulators overseeing Dominion Federal. In 1982, examiners with the Federal Home Loan Bank Board, which monitors federally insured S&Ls, cited Dominion Federal for a number of improper and questionable lending activities in connection with a series of construction ventures. A confidential copy of the examiners' 1982 report on Dominion Federal, and a companion letter from the bank board to the S&L's directors, were obtained by The Washington Post.

In their report, the bank board examiners detailed the "severe problems" that threatened five Dominion Federal loans totaling about $60 million, a significant portion of the S&L's construction loans. The problems included the S&L's failure to ensure that borrowers had put enough of their own capital into the projects, its lax control over the regular loan payments needed to keep construction going, and inadequate property appraisals, the examiners said.

In one case, the examiners found, the borrower put no money down to obtain a loan of nearly $8 million for the conversion of 226 apartments in Reston to condominiums. "Stronger requirements by Dominion for borrower equity and timely conversion and marketing could have prevented the extensive problems with this loan," the examination report said.

In another project, the $4.7 million conversion of 75 town houses, the borrower "had little equity from {the} inception" of the deal -- a total of $1,600 for all project expenses. Less than a year after issuing the loan, Dominion Federal was forced to take over the faltering project after the developer could sell only 11 of the units.

Following up on the examination, Robert J. Cohrs, a bank board official, wrote to Dominion Federal directors on March 23, 1983, blaming the association's "deficient" underwriting practices for causing a number of major construction loans to turn sour. The S&L's activities, Cohrs wrote, bordered on "unsafe and unsound practices."

The "underwriting weaknesses and potential ... losses on certain of these loans" were of "paramount" interest to the bank board, Cohrs added.

While characterizing his relations with regulators as "very good," Walde downplayed bank board criticism by saying that the whole purpose of examinations is to point out weaknesses and suggest possible improvements in operations. "I've never seen an audit or examination that has something good to say," Walde said.

"We adhere to the criticism. If a person doesn't sit down, listen to criticism and make changes, they're not going to be a success," Walde added. He said he believes that the bank board is satisfied with Dominion Federal's current performance.

P. Thomas Zimmerman, executive vice president of the Atlanta Federal Home Loan Bank, which has responsibility for Dominion Federal, said regulations precluded him from commenting on Dominion Federal's relationship with regulators.

Federal regulators were not the only ones raising concerns during this period. Some of Dominion Federal's officers were worried about the institution's conduct of business. William Harvey, who until 1983 oversaw the S&L's real estate appraisal arm, offered one glimpse into the inner workings of the association in a lengthy deposition he gave in 1986 in connection with a lawsuit filed against Dominion Federal by a local developer.

Harvey, who worked at Dominion Federal during two of its busiest years, testified that he resigned in protest after complaining about Dominion Federal's operations and unsuccessfully challenging some of Walde's plans.

"The basic rules and regulations were violated, and I didn't want to be a part of it," Harvey said in the deposition. "I felt their growth was explosive and management was not in place to manage that growth."

Bruce D. Lyons, who was in charge of another Dominion Federal subsidiary, warned Walde that the S&L was suffering an "identity crisis" that left some managers in the dark about many of the association's activities.

In an interoffice memorandum dated June 10, 1983, Lyons urged Walde to devise an "orderly, well thought out and properly executed plan to achieve our financial goals and deal responsibly with our legal obligations." If he did not, Lyons said, Walde would "run the risk of wasting a lot of valuable time trying to explain something that happened a long time ago to some auditor, regulator or investigator."

According to Harvey's deposition, Dominion Federal followed through on Lyons' recommendations.

Nonetheless, federal regulators -- some of whom had nicknamed Walde "Wild Bill," according to one former official -- continued to show concern. In November 1984, the bank board and Dominion Federal signed what is known as a "supervisory agreement," one of the tools the government uses to correct violations of federal regulations or other S&L problems.

Walde's institution, one of 116 of the nation's 3,500 savings and loans to sign a supervisory agreement that year, agreed to follow federally prescribed "policies and procedures pertaining to loan and investment underwriting, property appraisal and construction lending," according to Dominion Federal's annual report for 1987. The agreement required Dominion Federal to curb its growth by capping annual increases in total savings deposits and borrowings at 25 percent. Dominion Federal also had to bolster its capital in line with stricter federal standards.

"They wanted us to slow down our growth, and we agreed to it," Walde said. Dominion Federal has since curbed its growth, and the agreement has been allowed to expire, he added.

Another former federal official with firsthand knowledge of Dominion Federal's operations said that while regulators continued to harbor reservations about Walde during this period, the association was by no means the worst of the nation's high-flying thrift institutions. "He would walk that fine line," said this former official, who asked not to be identified.

One nationwide real estate network that offered the kind of profits Walde sought was Equity Programs Investment Corp. (EPIC), an arm of Community Savings & Loan Association of Bethesda. EPIC, essentially a giant tax shelter for thousands of investors, relied on constant funding from lenders to expand its empire of investment properties throughout the early 1980s. Dominion Federal, according to a former EPIC official, acted as a clearinghouse for the buying and selling of millions of dollars in loans to EPIC partnerships.

Yet, behind its facade of financial security, EPIC was teetering close to insolvency, kept alive only by cash infusions from Community Savings & Loan. When the EPIC partnerships defaulted on $1.6 billion worth of mortgages in the summer of 1985, Dominion Federal was stuck with more than $60 million in problem loans. Making matters worse, the loans were backed by hard-to-sell properties in Texas and other states with stagnant real estate markets.

Walde has had other headaches. A number of condominium-conversion projects Dominion Federal financed for Washington's Nordheimer brothers had problems, forcing the S&L either to foreclose or refinance. At River Place, a 1,600-unit project in Arlington, dozens of borrowers defaulted on their Dominion Federal loans, and the association has foreclosed on at least 47 units. At the Parkside Condominiums in Bethesda, 100 limited partnerships that bought units with borrowed money from the S&L filed for bankruptcy in August after they didn't make payments on their mortgages.

Beyond the Washington area, other Dominion-financed projects have run into trouble. In Sacramento, loans on two condominium projects were classified as "substandard" because of cost overruns, construction problems and, in the case of one of the loans, an inadequate appraisal. In recent financial filings with the bank board, Dominion Federal disclosed foreclosures on several projects, including condominiums in Key Biscayne and Miami.

As a consequence, "scheduled" items -- or problem loans and property, which are a key barometer of an S&L's health -- have reached record highs for Dominion Federal. In the early 1980s, Dominion Federal's scheduled items hovered between $300,000 and $400,000, skyrocketing by 1983 to $14 million, $59 million in 1985 and $155 million as of last September, according to the S&L's financial statements.

Sheshunoff Rating Services, an industry analyst, reports that as of last June -- its most recent assessment -- Dominion Federal's ratio of foreclosed property and other repossessed assets to total assets was almost three times the Virginia average and almost twice the national average. More than 8 percent of Dominion Federal's total assets are scheduled items -- compared with a national average of 3.8 percent.

In interviews, Walde defended the association's lending practices and said he remains as confident as ever about the institution's financial health. Although the association has set aside $6 million to cover possible losses from EPIC, it has rapidly been selling off those houses, and Walde said, "We have yet to lose one dollar in principal."

Similarly, the loan portfolio is in far better shape than the high number of scheduled items would suggest, according to Walde. He attributed much of the increase in that category to federal bookkeeping rules that required Dominion Federal to schedule those loans it makes to facilitate the sale of distressed properties. He said planned changes in those federal regulations will allow the S&L to reduce sharply its number of scheduled items.

In general, Walde added, far from being a free-wheeling lender, Dominion Federal is actually quite conservative.

"We will do just like any other lender is going to do," Walde said. "We're going to make sure that the papers are properly reviewed, that they're going to meet the test of the Federal Home Loan Bank Board -- the safe and soundness issue. We're not going to just go out and give somebody a mortgage."

At the same time, Walde said, "Everybody goes through growth problems." He added: "Today, our principal investment focus is on single-family, residential business. ... I don't necessarily think commercial lending is where I want to be today."

Generous to Friends To his friends, Bill Walde was ever the generous millionaire. The business associate who donated the use of a corporate jet to transport one of Walde's daughters to Canada for special surgery received a $4,000 Rolex wristwatch. When a Silver Spring developer needed $3,000 to underwrite Junior Achievement classes for some high school students, Walde instantly wrote a check for the entire amount.

When another acquaintance tipped Walde to a choice piece of real estate coming up for sale, Walde returned the favor several months later with a fat finder's fee. "He didn't have to do it," recalled the friend, District developer Dick Haase. "He's a guy that has a loyalty about him."

Although his ventures have made millions for several local -- and loyal -- developers, some other clients have found dealing with Walde and Dominion Federal to be anything but pleasant.

One such customer was Coldwell Banker Residential Mortgage Services Inc., a Los Angeles-based firm that signed an agreement with Dominion Federal in March of 1984 to sell the association $5 million worth of home mortgages. Such agreements -- known as commitments -- are critical to mortgage bankers, who otherwise would not have the capital to issue loans for home buyers.

After paying Dominion Federal a $25,000 fee for the commitment, Coldwell Banker proceeded to ship 46 loans to Dominion Federal for final approval and purchase. In the interim, however, interest rates had risen, meaning that Walde's S&L would be purchasing below-market-rate loans if it followed the agreement to the letter.

Dominion Federal rejected all but five of the loans, according to allegations in a lawsuit subsequently filed in Los Angeles County Superior Court. Coldwell Banker accused Dominion Federal of rejecting the loans "in bad faith when it determined that ... it would lose money by purchasing loans at the 12.875 percent interest rate specified in the loan commitment." Once Dominion Federal rejected the bulk of the loans, Coldwell Banker was forced to eat the difference -- more than $348,000 -- according to the lawsuit.

Dominion Federal countered by saying that the mortgages did not conform to the requirements of the commitment agreement, thus relieving the association of any responsibility to buy the loans. Coldwell Banker's suit is still pending in Los Angeles.

Disputes over the precise terms of loan commitments are common in the S&L business, where a percentage point here or a legal phrase there can make the difference between profit or loss later. But Walde was adept at using every conceivable legal technicality to back out of or rewrite the terms of agreements, according to disgruntled former customers.

Douglas N. Stinson, a mortgage banker in Charleston, W.Va., said he was victimized by Dominion Federal in 1984, when he was president of a company called Reliable Mortgage Inc. Reliable's claims were akin to Coldwell Banker's: After shipping $1 million worth of mortgages to Dominion Federal, interest rates climbed during the 60-day commitment period.

Suddenly, Stinson said, Dominion Federal discovered "problems" with many of his loans. "Nobody would answer my phone calls," he said. "They were like ghosts."

Dominion Federal finally responded with the reasons the mortgages were being rejected: some of Stinson's loans were late, some of the forms had inaccurate zip codes, and some had a number of names misspelled. "They didn't honor their commitment, and they did their best to renege on it," Stinson said. Rather than suing, Stinson said he settled his dispute out of court -- but even then, he said, he ended up losing $15,000.

Walde could not recall the deal with Stinson, but said his complaint was "total sour grapes." Had the mortgage banker submitted the loans in proper form, "I would have bought them," Walde said. "But I'm not going to buy substandard packages."

Unlike many other bankers, Walde and his staff at times seemed almost to relish the prospect of taking over problem projects and finishing them off themselves. Employes of one Dominion Federal subsidiary -- responsible in part for completing and then selling foreclosed properties -- had T-shirts printed with a giant, leering vulture squeezing an unfinished skyscraper marked "FORECLOSED."

"Your loss is our gain," the T-shirt proclaimed. An enraged Walde ordered the shirts confiscated, sources said.

Stewart Mechanic, a former appraiser who was fired from Dominion Federal, described Walde's approach in a deposition: "If you don't live up to what the deal is, he doesn't wait around. He just takes it over." Not only that, several developers have alleged, Dominion Federal pushed some weak borrowers over the brink.

Barry Khamnei, an Iranian-born developer, negotiated a $14 million loan from Dominion Federal in 1982 to finance the acquisition and condominium conversion of a 400-unit apartment complex in Fairfax called Lafayette Park. The deal, described in files in U.S. Bankruptcy Court in Alexandria, was doomed almost from the start.

Harvey, the former appraiser for the S&L, testified in his 1986 deposition that Khamnei's Arin Co. was in a "no-win situation," unable ever to sell enough units to qualify for needed loan disbursements. Moreover, Khamnei's lawyer later complained, the association worked actively to undercut Arin by withholding loan proceeds and refusing to approve the pending sales of some of the condominium units.

"These actions appear to have been designed to deprive Arin of its ability to complete the Lafayette Park project and to force Arin to forfeit the project" to Dominion Federal and two other lenders, Arin counsel Barry J. Dichter wrote in a letter to the association's lawyer.

The result, Dichter said, would be that the lenders "improperly obtaining for themselves the economic benefits that would be received on the completion of the project."

Walde was fully aware that Khamnei had more to lose than Lafayette Park alone, according to testimony. Dominion Federal's chief had commented to William Harvey in the association's board room that "foreclosure was grounds for deportation, and that Khamnei would not enjoy a trip back to Iran," Harvey said in the deposition.

Dominion Federal did take over the project in the end -- after paying Arin an $800,000 settlement, according to court records. Walde denied undercutting Khamnei and said the S&L moved in to assume the project only after a slowdown in the sales needed to pay off the loan from Dominion Federal. "If nothing is being sold, that's not my fault," Walde said.

At times, customers have felt driven to extremes by Dominion Federal. On one occasion, a developer went so far as to block the driveway of a Dominion Federal branch with a Caterpillar tractor. Walde said he regarded the incident as nothing more than a "joke." Another time, the lawyer for a group trying to buy homes in a Shirlington subdivision sent 16 of the customers to the association's lobby during a board meeting to protest what they considered to be the S&L's slow processing of their loan applications. "They were intentionally dragging their feet," said the lawyer, Stanley Brock. "We had to go to that extent to get them to responsibly act on their commitment."

Some admirers concede Walde can be difficult. "Lots of times, we haven't made deals with Bill because he's been too tough," said Gary Nordheimer, a local developer who has dealt with Dominion Federal for years. "If anything, he cuts a tough bargain for his shareholders."

"Bill's a stickler," said Marty Alloy, a prominent Montgomery County builder. "Though he can shake your hand, you have to follow the rules."

Problems arise, Alloy continued, "when you take some marginal lenders and a deal is made and he asks for certain requirements and they can't live up to them. It's more sour grapes. You get a lot of people saying, 'Bill, you screwed me.' You don't hear it from strong people."

Walde, for his part, freely acknowledges taking a hard line when negotiating deals for his S&L. "We're tough," he said, "we're real conservative, we make sure people dot their I's and cross their T's. ... If you're going to put your money out, you're doing to do the same thing I'm going to do."

As for legal proceedings against Dominion Federal, Walde said he was "troubled by any lawsuit." While he refused to comment on the specifics of pending lawsuits on the advice of his attorney, he dismissed them as a "negotiating ploy."

"When you're putting out $1.8 billion, you're going to take a few lumps." Walde said, adding, "There's going to be somebody that's going to get up and say something negative, I don't care how pure you are. ... Look at the number of lawsuits, the number of problems that we've been involved with {for} the amount of business that we do -- it's a very small amount. It's a very small amount, because people wouldn't keep coming back.

"We're not out to create problems," Walde said. "But when you have hundreds of loan officers on the street representing a financial institution, and if they do something wrong out there, say something wrong to somebody -- you want to see the hair on the back of my neck get up?"

Still, Walde said, things at Dominion Federal have changed in at least one respect: "I won't do business with second-class people anymore. It doesn't pay to bend down for somebody ... because you're going to get your fingers caught in a mousetrap."

Despite his recent setbacks, Walde publicly maintains his customary elan.

"We want a good image out there. This is my baby, and I really want to make sure its the best-run institution. I'm not in this business for the quick turnaround or selling the bank. I'm in this for the long-term haul. I've got my heart and soul in this company."

"I'm still buying my stock," Walde added, "and I still got $2.5 million on deposit in this institution. So I'm putting my money where my mouth is. I got my kids' money in here. I got my mother's money in here. I got my aunt's money in here.

"I want to get all the stories over with and just go back to what we do best: making mortgage loans to people, paying them a good return on their deposits, and let's get on with our lives."

Special correspondent John Kennedy contributed to this report.