When David L. Butler's real estate development company faced collapse in 1982, he found a novel and lucrative way out: He swapped it for control of a Northern California savings and loan.
The 29-year-old developer then turned Bell Savings & Loan into a personal piggy bank, paying himself millions of dollars and bankrolling questionable projects of friends and associates, according to court records.
Along the way came perks, courtesy of the San Mateo thrift, such as a $50,000 Jaguar and a $2-million airplane with a $4,700 video center and a $4,500 toilet upholstered in red leather. There was also a small fleet of Mercedes-Benzes for his fellow officials and a Ferrari for a thrift employee identified in court records as Butler's girlfriend.
Ultimately, it was Bell S&L that collapsed. Since federal regulators took control of the institution in mid-1985, Bell has lost more than $495 million, including $17 million on Butler's original development company.
The greed and high living of dozens of savings and loan owners with the instincts of gamblers have turned an industry created to finance the American dream of home ownership into a nightmare. The abuses have hobbled the industry, which just last week reported losses totaling $3.8 billion for the first quarter of 1988, and bankrupted the agency that insures its deposits.
To survive the enormous costs of the failed and failing thrifts, the Federal Savings and Loan Insurance Corp. may well need a federal bailout.
If that happens, the nation's taxpayers will find themselves paying for such extravagances as Butler's Jaguar, Erwin Hansen's $900,000 penthouse condominium at the foot of Telegraph Hill in San Francisco and Don Dixon's $2-million Del Mar beach house.
Drawn from court records, here are three of the cases that best symbolize the thrift industry's woes:
The Texas High-Roller
The biggest high-roller of them all may turn out to be Don Ray Dixon, a Dallas real estate developer who transformed a sleepy thrift in Vernon, Tex., into one of the nation's fastest growing savings and loans and his ticket to the good life on the sunny coast of Southern California. By the time he was stopped by regulators in March of 1987, Vernon Savings & Loan's assets had exploded to $1.4 billion from $82 million--and 96% of its loans were in default.
The collapse of Vernon is the subject of a federal criminal investigation and a $540-million civil lawsuit by FSLIC--the agency's largest ever--that chronicles spending by Dixon lavish enough to make a potentate blush.
In October of 1983, Dixon and his wife, Dana, took another couple on a whirlwind 10-day tour of Europe aboard chartered aircraft. Dana Dixon called the trip "a flying house party" and a "gastronomique fantastique" in a 17-page diary that is part of the court record.
In elaborate detail, she described eating at seven three-star restaurants in France, highlighted by a lunch with truffle soup and Champagne in Lyons after which famed chef Paul Bocuse lined up 12 of his cooks for an inspection.
Vernon S&L paid for the entire trip, which Dixon claimed was a market study for his plan to open a fancy restaurant in Dallas. It was one of four European junkets by Dixon that cost Vernon a total of $68,000.
Another trip occurred in the spring of 1985, when the couple flew to Europe aboard a company-owned Falcon 50, a top-of-the-line corporate jet. Their guests were Roman Catholic Bishop Leo T. Maher of San Diego and his assistant, Monsignor I. B. Eagen.
The group stayed at the Grosvenor House hotel in London, the Bristol in Paris and the Ritz in Madrid. The high point this time was an audience with Pope John Paul II, arranged by Maher. Dixon presented the pontiff with a $40,000 painting, "Night Sentry" by Olaf Wieghorst of El Cajon, courtesy of Vernon's extensive collection of Western art.
Not counting the painting or the cost of operating the jet, the trip cost the savings and loan firm $17,319.
Dan E. Pitre, a spokesman for Maher, said the bishop was not aware that Vernon had paid for the trip or the painting. He said Maher and Eagen were going to Europe on church business anyway and merely accepted the invitation from the Dixons.
Vernon's money helped pave Dixon's way into San Diego society and to get him appointed in 1984 to the board of trustees of the University of San Diego, a Roman Catholic school. He later gave the university $3 million worth of stock in Vernon's parent company. The stock is essentially worthless now and Dixon's term on the board expired last year.
Court records show that the thrift's money was used to buy a $2.6-million yacht named High Spirits, a sister ship to the one-time presidential yacht Sequoia; a Rolls-Royce and Ferrari dealership in La Jolla; a $1-million home in Solano Beach near San Diego, and the $2-million beach house on the Pacific in Del Mar, north of San Diego, where Dixon lived rent free.