It was supposed to be a sure-fire investment. Buy stock in the District's oldest bank, sit back and watch the flood of bank mergers in the Washington area sweep the share price skyward to fortune.
But for the 1,300 shareholders of the parent firm of National Bank of Washington, including some of the city's most prominent attorneys, politicians and executives, it didn't work out that way.
When the federal government declared the bank insolvent, shut it down and sold it to Riggs National Bank on Aug. 10, the value of the bank company's 7 million shares was wiped out instantly.
Just five months before, National Bank of Washington (NBW) looked like a great investment. NBW's parent company's stock was trading at $15.25 and attorney Robert B. Washington Jr. announced a takeover bid of $19.20 per share. But after the takeover bid got derailed, the bad loans piled up, the management turmoil heated up and the regulators stepped in, the value of the bank company's stock was no more.
In a few short months, more than $100 million of stock market value went up in smoke. And some big names got burned.
Like restaurateur Ulysses "Blackie" Auger, who got stuck with 6,220 shares. And National Security Adviser Brent Scowcroft, who owned 15,857 shares. Former Democratic National Committee chairman Charles T. Manatt, who had 15,393 shares. And prominent local attorney R. Robert Linowes, with 46,181 shares -- more than $650,000 worth of stock at the shares' peak.
"This was a valuable franchise," said John P. Kyle, a partner in Vector Realty Group Inc., who ended up with 24,118 shares on his hands. "It's almost impossible to believe that it ended like this."
The failure of NBW left many Washingtonians wondering why it had happened. But it left usually savvy shareholders wondering why they had participated in its demise.
The list of NBW stockholders as of July 20 reads like a Who's Who in Washington.
Many of these investors bought in at $16 a share in 1985, when former Chairman Luther H. Hodges Jr. took control of the bank from the United Mine Workers.
At the time, banks in the District were being gobbled up at a premium by the financial powerhouses of Maryland and Virginia.
Signet bought Security National, Crestar bought National Savings & Trust Co., Sovran acquired D.C. National and Dominion purchased the National Bank of Commerce.
The pillars of the Washington business community waited patiently for their merger partner to emerge.
But poor financial results, boardroom power struggles and management instability kept the investors on hold.
Although there were glimmers of hope -- the takeover bid from Washington, a fresh management team led by John J. Mason that took control this summer -- in the end, more than 1,300 people eventually watched as their investment turned worthless.
The biggest losers were those who had at one time played a role in the bank's management. Wafic Said, the Saudi investor who owned 27 percent of Washington Bancorporation, the parent firm, and tried to oust Hodges in 1987, reportedly lost more than $20 million.
Hodges, who resigned as chairman in January after failing to find a buyer for the bank, lost about $4 million. And Mason, who took the reins as chairman less than two months ago, lost a staggering $6 million.
Also on the million-dollar losers list:
Thomas Hale Boggs Jr., one of Washington's highest-paid lawyer-lobbyists and a director of Washington Bancorp.; Charles S. Bresler, a director of NBW and the chief executive officer of the real estate development firm Bresler & Reiner Inc.; Wallace F. Holladay, a real estate mogul and director of Washington Bancorp.; Harry Huge, a lawyer and director of Washington Bancorp.; Duff Kennedy, president of Kennedy Associates Real Estate Counsel and director of Washington Bancorp.; James and Theodore Pedas, real estate developers and former owners of the Circle Theater movie chain; and Robert Washington, a former director who participated in Hodges's ouster and tried several times to buy the bank company.
"I am both embarrassed and concerned about what happened," said Washington, whose holdings totaled about 300,000 shares.
"I was not only wiped out personally, but I convinced a number of friends to invest who also lost money."
Washington revoked his $19.20 a share takeover offer shortly after the bank announced a $5 million loss in the first quarter of 1990.
Although he said at the time he was willing to rebid and offer a more "reasonable" price in the wake of the disclosure, the board never reconsidered his offer, in part because he never had firm financing.
Shortly thereafter, the bank's parent firm defaulted on its short-term debt, sparking the cash crunch that ultimately led to the collapse of Washington Bancorporation and the federal takeover of the bank.
In addition to the big names, hundreds of smaller investors also got hurt.
People like William L. Amtmann of Potomac, who owned 304 shares; Edith E. Ashworth of Oakton, Va., who owned 500 shares; and James H. Bancroft of Vienna, who owned 900 shares.
"I guess I just thought banks were a safe investment," said Maria Swift, who bought 560 shares of NBW bank company stock in 1987 and lost an estimated $8,000.
"I'm not a professional investor or anything.
"I just thought it was a good buy. I never thought anything like this could really happen," she said.
Shareholders interviewed last week said they felt cheated and betrayed by the bank's management, but for the most part, they blamed the federal government for their losses.
"I thought, like a lot of people, even up until early or late spring of this year, that there was a reasonable chance that the management would be able to conclude a sale of the bank," said John Koskinen, owner of the American Soccer League team the Washington Stars, who got stuck with more than 12,000 shares.
"Obviously, we were all wrong because nobody ever did pay $150 million to buy the bank.
"But it's hard to imagine that something changed so radically in the area to cause the bank to be in such great difficulty. It's really hard to believe."
Like many investors, Koskinen, who first invested in 1985, said the government overreacted and moved too quickly to shut it down.
"Unquestionably this bank had value," investor Charles Bresler said, adding that it was the government's tough action that finally put the bank out of business.
"But the federal government is obviously spooked by the whole S&L crisis," Bresler said, "and that's made it impossible for banks."