risky new deals, and pay irrationally high interest on deposits, unfairly siphoning deposits away from competitors who might otherwise survive. Wright intervened with Gray for two other Texans in trouble. “Tom Gaubert’s a friend of mine,” he told me. “He and his lawyer, Abbe Lowell, tell me this long, long-ass story.” Gaubert contended to the Speaker that his S&L had been sound when the feds had forced him out of it in December 1984 and then they had violated his rights and mismanaged his company into insolvency. As Wright recalled it, after some hours he told Gaubert: “I don’t understand all this. Why don’t you go tell this to Ed Gray?” Wright called Gray to set up the meeting with Gaubert. After hearing Gaubert out, Gray agreed to find some way to evaluate his complaints. Wright was about to become Speaker then, and, Gray told me, “I needed him, especially him, to get this legislation” to provide borrowing authority to replenish the S&L insurance fund. At first Gray obtained the agreement of two of the three top U.S. bank regulators to evaluate Gaubert’s charges, but that fell through when the third one refused to join in the exercise. Eventually Gray offered Gaubert an accommodation that was far from routine Gray and Gaubert would agree on a lawyer whom Gray would hire to evaluate Gaubert’s charges. The independent counsel’s report to Gray, which is 182 pages long, informed him that, as Gaubert had alleged, the Bank Board had unfairly withheld information from Gaubert while negotiating an agreement with him, and then had violated the agreement. The report also concluded that the Bank Board had not used good judgment when it had forced through two acquisitions by Gaubert’s company, Independent American $375 million to $1.6 billion, while at the same time shoving aside Gaubert, “the one person who might have been able to wisely invest those funds.” But the report also said that Gaubert had given the regulators inaccurate information, and that the government had not driven his company into insolvency. The third Texan the hapless Wright helped turned out to be the most prominent figure in the scandal. “I don’t know Don Dixon,” Wright told me. “I wouldn’t know him if he walked in the door. I am told by Tony [California Congressman Tony Coelho, the House Democratic Whip and the Democrats’ congressional fund-raising chief, who also has since left Congress after allegations that he received ethically dubious gain] that I may have met him on a boat, that is, on the yacht, “High Spirits.” This craft’s purchase by more than 20 investors had been financed by Dixon’s Vernon Savings; Dixon used it to entertain members of Congress and others, and Gaubert used it, too, he said, for “buttering up” potential donors to the Democrats. According to a ruling by Federal Judge A. Joe Fish of Dallas, Vernon’s officers had required some of the thrift’s borrowers to invest in the yacht as a condition of getting loans. Wright told me that an aide told him Dixon had phoned. According to the aide, Dixon said his firm was going to be put out of business, but that it could be saved by a source of new funding in New Orleans if the regulators would give him another week. After hearing Dixon’s story, Wright said he called Gray and said: “I don’t know anything about this man’s business. Check it out and talk to Selby, and if there’s a chance [Dixon] can save it, give him a week, unless there’s an overriding reason to the contrary.’ ” Gray said he told Wright’s top aide at that point, John Mack, who later resigned after a vicious assault on a young woman which he had committed at the age of 19 was publicized at the height of Wright’s troubles, that Vernon was $300 million in the red, and “you’d have to be crazy to bring in money to save it,” but that there was no impediment to such an investor coming forward. None did. ‘Systematic Looting’? Early in 1987 the government closed Don Dixon’s $1.6-billion company, saying it was a third of a billion in the red. In 21 months, the regulators declared, Vernon had made more than $700 million worth of loans on real-estate projects. In a civil action seeking $540 million in damages, the regulators charged Dixon and his fellow officers with “systematic looting . . . The defendants misappropriated at least $40 million.” Allegedly, Vernon had loaned borrowers millions to repay their earlier loans, paid itself its own reported profits, agreed to “buy back” loans if the borrowers could not repay them, regularly doctored its corporate minutes, “hid files” and regularly omitted telling the regulators about delinquent loans, and required borrowers to invest in Vernon officers’ business projects as a condition of getting loans. Borrowers owed Vernon $40 million in delinquent interest; 95 percent of its commercial loans were in default. To cover up an anticipated $20 million in losses on parcels of real estate, Dixon and company allegedly had arranged fake sales to 20 friends of Dixon’s, lending them $98 million they were assured they would not have to pay back. THE REGULATORS said, as they slammed the barn door, that Dixon’s Vernon Savings had five airplanes the $2 million Pacific beach house in which Don and Dana Dixon lived rent-free, and a $900,000 art collection. In June 1985, the feds charged in the course of a criminal action, an executive vice-president and other officers of the company had hired eight to 12 women, two of them Dallas prostitutes who were flown to San Diego, so that “sexual favors would be available to Vernon officers and directors.” Dixon had been reimbursed $68,000 by his savings and loan for several trips to Europe, trips from which, a Bank Board examiner reported drily, Vernon had received “no apparent benefit.” Dropping into London, the Dixons had picked up half a million dollars worth of furnishings for the beach house. According to an examiner, through accounts for the beach house, the thrift had paid $37,000 for flowers, $13,000 for catering, $6,000 for plants and landscaping, $44,000 for “cash,” and $110 for a perfume bottle. The feds also charged that Dixon had received $9 million in salary, bonuses, and dividends from Vernon in the three years 1984 to 1986. In the month of August 1986, when, the feds said, the company “was on an irreversible course to collapse and disaster,” the company’s officials, milking the dying cow, had made loans to five of Vernon’s lesser officers for a total of $1.2 million. Early in 1986 an accountant joined Vernon as its chief lending officer. According to his affidavit, the officers of Vernon had sought “to create as much loan-fee income as possible, without particular regard to sound lending practice .. . Vernon routinely attempted to prevent its troubled borrowers from defaulting on their loans through the extension of additional credit . . . Vernon frequently purchased profit participations from borrowers that did not have cash to pay interest or loan fee charges.” Bankrupt in California, having taken the Fifth Amendment with the feds, Don Dixon did not return my phone call. “I’m not a 12 DECEMBER 15, 1989
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