Edwin McBirney III, a flamboyant Dallas businessman involved in one of the costliest savings and loan collapses in U.S. history, was indicted yesterday on 17 counts of bank fraud, misapplication of depositors funds and making false statements to federal regulators.

The indictment, handed up by a federal grand jury in Dallas, details an elaborate scheme by McBirney, the former owner of Dallas-based Sunbelt Savings Association of Texas, to finance a $700 million southern California real estate purchase through an allegedly illegal "reciprocal loan" deal with another thrift.

The government took control of Sunbelt in 1986 and officials said costs connected to the cleanup of the failed institution have reached $2 billion.

The deal was "fraudulent at its inception" and was followed by a "series of coverups" designed to disguise the details of the scheme to government regulators, according to Marvin Collins, the U.S. attorney in Dallas, who announced the indictment at a press conference with U.S. Attorney General Dick Thornburgh at the Justice Department.

The department has made several highly visible announcements of prosecutions since it began to come under sharp congressional criticism that it has failed to devote sufficient resources to the savings and loan scandal. Thornburgh described the McBirney case as a "milestone" in the government's thrift crackdown.

If convicted on all counts, McBirney could face up to 85 years in prison and $4.2 million in fines. But Paul Coggins, McBirney's lawyer, said his client did not personally benefit from the reciprocal loan deal, adding that "we intend to prove that he acted in the best interest of Sunbelt."

"This is the kind of government overkill that you would expect with the hysteria over the S&Ls," he said. "What you basically have here is a single transaction that the government doesn't like ... A few years back, it would have been a two or three count indictment, but because they spent years chasing this guy and millions of dollars, they come up with 17 counts."

McBirney, who resigned from Sunbelt three years ago and has since worked as a financial consultant in the Dallas area, has agreed to turn himself in today when he makes an initial court appearance.

Until Sunbelt was taken over in 1986, McBirney had a reputation as being among the most hard-charging and colorful of a group of executives who typified the fast-growing Texas thrift industry in the early and mid-1980s. Nicknamed "Fast Eddie" because of his love for big development deals, he spent more than $1.3 million of Sunbelt's money on Halloween and Christmas parties in 1984 and 1985 and dressed up at one such event as a king and served lion and antelope to his guests, according to allegations detailed in a government civil suit filed against him.

McBirney, a self-made millionaire, also became a large political donor during a period when several Texas thrift executives began trying to make friends in Washington. According to federal campaign records, he gave $10,500 to the Republican National Committee and $11,000 to the Democratic Congressional Campaign Committee run by then Rep. Tony Coelho (D-Calif.) during the 1986 campaign.

Officials said the indictment returned yesterday is likely to be typical of future savings and loan prosecutions -- highly technical financial fraud cases that involve voluminous records and complex transactions.

At the heart of the case was the reciprocal loan deal McBirney entered in 1984 with Western Savings Association. At the time, Sunbelt was attempting to arrange $30 million in financing so that Sun Cal. Inc., a Sunbelt subsidiary, could complete financing on a $700 million purchase of real estate in southern California, the indictment alleges.

To obtain the money, McBirney allegedly offered Western Savings a $6 million profit on any property Western wanted to sell if, in return, Western agreed to provide the $30 million loan to Sun Cal., the indictment alleges.

According to the indictment, Western selected a 708-acre tract of land in Denton County for this purpose. The land had been bought by Western for $4.5 million and appraised for $13 million, but Sunbelt made the purchaser -- whose name was not disclosed -- a loan of $21.1 million. It was later increased to $22.6 million, it charges.

The indictment further alleges that to keep the Denton County loan out of default and to prevent regulators from learning about it, McBirney made additional loans to third parties and diverted the proceeds to keep the Denton County loan current.

Collins told reporters that the government's case against McBirney was deliberately scaled back because prosecutors feared it might be difficult for jurors to follow. Instead of a six-month-long prosecution, which the government could have brought, Collins said he expected the case would take less than six weeks to prosecute.

"In any case that is this complex, you have to be mindful that the jurors can only absorb so much and only understand so much," he told reporters. "We have the same problem ourselves."