We took some heat a few months ago from House Speaker Jim Wright (D-Tex.) when we broke the story of his efforts to save floundering Texas savings and loan associations at great risk to the taxpayer-backed federal insurance fund. Wright claimed that federal regulators were unfairly picking on the Texas S&Ls, like Vernon Savings and Loan of Dallas.
Our associate Michael Binstein obtained confidential examiners' summaries on Vernon prepared by the Federal Home Loan Bank Board. The documents dispel any notion that the Vernon S&L was an innocent victim of cruel government gumshoes.
In point of fact, Vernon was on the ropes because its owners maintained a life style worthy of Jim and Tammy Bakker and mismanaged the S&L's finances outrageously. Several weeks after our original story on Vernon ran, the S&L failed, leaving a bill for $1 billion to be picked up by the Federal Savings and Loan Insurance Corp.
In April, the FSLIC filed suit against Vernon's owner, Don Dixon, and six other executives. The agency is seeking $350 million, charging the one-time high-rolling S&L big shots with "looting and self-dealing" that caused Vernon's failure.
Here are some of the allegations about Vernon Savings & Loan gleaned from FSLIC documents filed in a bankruptcy proceeding this month:Dixon and other senior officers falsified the thrift's financial statements and "fraudulently overstated" its net worth to justify millions of dollars in dividends, bonuses and expensive perquisites. Dixon alone collected more than $8 million in bonuses in the last few years. During much of this time, Vernon S&L had a negative net worth. Dixon and others had the savings and loan pay "huge sums of money" that were diverted to their personal use. These payments greatly increased the S&L's cost of doing business, and increased the pressure on its executives to "falsely inflate reported profits and net worth," according to an FSLIC document.
Our original report that Dixon had the savings and loan buy a beach house for his personal use is confirmed by the government documents. The beach house, in Del Mar, Calif., cost about $2 million. Dixon and his wife moved into the house in June 1985, and lived there for a year rent-free.
The S&L also paid Dixon's bills for about $800,000 worth of personal expenses since 1982. These included $36,780 for flowers; $44,095 in cash; $386 for pet services (though apparently no Bakker-style air-conditioned doghouse); $1,794 for cable TV service; $13,446 for catering; $4,420 for pool service, and $2,408 for a graduation party. Dixon squandered Vernon S&L's assets to maintain his "indulgent and opulent life style," the FSLIC charges. Examples the agency cites include lavish, unjustified trips to Europe, an expensive fleet of airplanes, the beach house and a yacht.
All told, the FSLIC estimates, at least $40 million of Vernon S&L's funds were misappropriated by Dixon and other senior executives. More than 95 percent of the savings and loan association's commercial loan portfolio is now in default.