Ex-Owner of Dallas S&L; Indicted in Alleged Fraud

The former owner of a failed Dallas savings and loan was indicted Thursday on charges that he made millions of dollars in fraudulent loans to prop up the institution while transferring $7 million from the thrift to himself.

A 37-count indictment returned by a federal grand jury in Dallas charged Jarrett E. Woods Jr., former owner and chief executive of Western Savings Assn., with bank fraud, misapplication of bank funds, making false ledger entries and conspiracy.

The indictment was announced at a press conference here by Atty. Gen. Dick Thornburgh and Marvin Collins, the U.S. attorney in Dallas.

Western Savings was seized by federal regulators in September, 1986, and Thornburgh said its losses are expected to cost taxpayers in excess of $1 billion. Thornburgh called Woods “one of the biggest savings and loan bandits in Texas.”

An attempt to reach Woods was unsuccessful. If convicted, he faces up to 185 years in prison and a minimum fine of $8.2 million.

According to the indictment and Thornburgh, one of the thrift’s major borrowers, businessman James Reagin, was in financial difficulty in late 1985 and in danger of defaulting on millions of dollars worth of loans at Western Savings. Had Reagin defaulted, Thornburgh said, Western Savings would have been insolvent and regulators would have seized it.

To keep the thrift afloat, Woods made more than $60 million in new loans and diverted some of the proceeds to Reagin so that he could make the payments on his old loans, according to the indictment.

Reagin has pleaded guilty to related federal charges in Texas and Illinois and awaits sentencing.

The criminal charges did not specify how Woods profited from the diversion aside from keeping the institution alive. But a civil lawsuit filed Wednesday by the Federal Deposit Insurance Corp. said that during the thrift’s last nine months of operations, Woods transferred $7 million in cash to himself and his family.

The cash was used to refinance Woods’ home, pay off a personal loan, increase his children’s trust funds, and pay him an $800,000 bonus and $41,667 a month in salary, said the FDIC suit, which seeks to recover $560 million from Woods.

In addition to the alleged diversions, the indictment accused Woods of using $33,000 in thrift money to pay a personal gambling debt and disguising the money as a commission to the recipient.

Thornburgh said that the Western Savings investigation was one of the 100 top priority cases developed by the Justice Department and the Office of Thrift Supervision, which regulates thrifts.

Justice Department officials said they consider Woods to be one of the most significant savings and loan figures in Texas, ranking him behind Don R. Dixon and Edwin T. McBirney III. McBirney faces criminal charges and Dixon’s trial opened Thursday in Dallas.

Prosecutors charged in their opening statement that Dixon used funds from Vernon Savings & Loan in Vernon, Tex., to pay for prostitutes, beach houses, a yacht and other lavish entertainment while watching the institution fail.