With Time Running Out, Federal Investigators . . . Learn To Prosecute S&L Cases In Small Bites

DALLAS - Within a month of arriving at the Dallas FBI office in November 1988, agent Vic Houston was handed a tough assignment: Sift through a file of 3 1/2-year-old allegations and find a way to put former savings-and-loan executive John H. Roberts Jr. in jail.

The lines of inquiry seemed endless. Should Houston investigate the millions of dollars in loans that Roberts had made to his friends, relatives and business associates while he owned Summit Savings Association? Or should he concentrate on the millions that Roberts had borrowed from another Dallas thrift and never paid back? Then again, maybe he should go after several questionable land deals, or the unexplained transfers of Summit funds and stocks to Roberts's personal account.

In the end, Houston zeroed in on a scheme that seemed clear-cut and simple: Roberts' use of Summit funds to buy himself a jet airplane, which he concealed with the help of a straw borrower. It was only one piece of what appeared to be a grand puzzle of unusual transactions. But it was something Houston thought he could prove and a jury could grasp.

The Summit case, resulting in a 5-year prison term for Roberts and his cooperation in investigations of other thrift owners, illustrates the prevailing theory of how to prosecute the hundreds of complicated savings-and-loan cases now under way: Simplify, streamline and, to some extent, deal.

Congress has stiffened bank-fraud statutes and expanded the Justice Department's budget in hopes that savings-and-loan crooks will be investigated and prosecuted. But FBI agents and prosecutors have decided that when the landscape of fraud is so vast, less is often more.

``Will we ever know the totality of the criminality? Probably not,'' said Tony Adamski, who heads the FBI's financial-crimes unit.

After the first few savings-and-loan cases, Justice Department officials decided they had to shortcut the traditional approach to white-collar crime, where investigators start at the bottom of a pyramid and try to re-create a scheme in its entirety. Instead, their strategy is to identify the most culpable players and try to tie them to discrete transactions for a ``snapshot'' indictment on a lesser charge.

The trade-off in this approach is that it forces prosecutors to make more deals with lower-level players in order to scale the pyramid, said Marvin Collins, the U.S. attorney in Dallas, home of a 125-member task force that is viewed as a model for the Justice Department's efforts.

A narrower indictment also may produce a shorter prison sentence.

The Dallas Bank Fraud Task Force's record thus far provides an indication of the punishment being meted out. Of 45 defendants who have been convicted and sentenced, 15 received probation. Those sentenced to prison received an average term of about four years.

Nationally, 316 individuals have been convicted in major savings-and-loan cases that involved thrift principals, multiple borrowers or more than $100,000 in losses. About 77 percent of those convicted have received prison time. Judges have fined the defendants a total of $3.6 million and ordered $201 million in restitution.

Meanwhile, the FBI has 654 investigations under way with more to come. Attorney General Dick Thornburgh has said he expects agents and prosecutors will be working on thrift cases for five years.

Northern Texas has been the laboratory for S&L prosecutions. The first major case here, involving dozens of defendants, was numbingly complex. It drew a grand picture of fraud along Interstate 30 outside Dallas, involving five savings and loans and $140 million in fraudulent loans for condominium development.

More than 100 people have been convicted since a task force created specifically for this case began its investigation five years ago. But when the top seven defendants went to trial in 1989, a jury deadlocked after hearing seven months of evidence. Collins decided that he could not possibly ``do another 20 cases like that.''

The next indictments, handled by the Dallas Bank Fraud force, centered on simpler schemes involving kickbacks from loans, false statements to regulators, tax violations and the use of thrift funds to make illegal campaign contributions, finance a private beach house or pay for prostitutes.

The Summit file sat for the better part of two years before Vic Houston was transferred to Dallas in November 1988. Houston was part of a wave of reinforcements ordered by Washington in response to the passionate pleas of U.S. Attorney Collins and Bobby Gillham, head of the Dallas FBI office.

The short, gray-haired Houston struck an unprepossessing figure at his desk in the noisiest, least-desirable spot of ``the bullpen'' of the FBI's office. Soon, however, other agents found themselves asking him for advice. Unlike many of them, he had handled bank failures at his previous assignment in Midland, Texas. Once, he had even worked at a bank.

When Houston ordered the Roberts file from the documents room, nicknamed ``the black hole,'' his first reaction was dismay. Although FBI officials by then had listed the case among their top five, the most promising allegation was beyond the statute of limitations. ``You look at it and say, `Why didn't we have this before?' '' he said.

The most frequent answer in Dallas those days was deregulation. In the early 1980s, 100 federal examiners had supervised 500 thrifts in five states.

But in Summit's case, regulators were unusually dogged, conducting nearly continuous examinations after Roberts, then 37, purchased Summit in November 1983 for $980,000 in cash and stock. They fell down, however, in sending criminal referrals to the FBI, waiting nearly 18 months to forward information unearthed in early 1985.

Under the statute of limitations in effect at the time, Houston had six months left to make a case.

One option was to concentrate on more recent loans that Roberts had received from two other Dallas S&Ls on the task force's list, Sunbelt Savings Association and Western Savings Association. But Roberts's dealings with them were complicated and cloudy. Robert F. Adams, the prosecutor, believed the best plan was to nail Roberts on Summit transactions, then flip him to pick up new information about Sunbelt and Western.

``Our goal was to get Roberts in and pled,'' Adams said. ``A relatively quick and simple case . . . would secure Roberts' cooperation and give us a big leg up in getting at the other owners.''

From 15 white referral forms sent by the regulators, Houston picked four transactions to pursue and requested 46 more subpoenas. He was so worried about running out of time that he did not even read the bank-examination reports.

Initially, regulators had been relieved to see the soft-spoken, likable real-estate investor from San Antonio take over Summit in late 1983 as it teetered on the brink of solvency.

He had some experience in the business: Besides Summit, he owned mid-sized Commerce Savings and Loan in Dallas from 1982 to 1984.

Federal regulators watched brokered deposits flow into the institution for its high interest rates and vanish into questionable real-estate transactions and loans. Loan files contained no loan applications and, often, no substantiation collateral, Dermody said.

At the end of a number of complex transactions, regulators uncovered signs of benefits to Roberts. One exam showed the thrift had paid $3 million for a Manhattan co-op, where Roberts lived much of the time.

Another exam showed that Summit had loaned $2.5 million to a friend of Roberts and that $117,000 of the loan went to Roberts.

In 1985, only two years after he bought Summit, Roberts was forced to give up his ownership. He pledged all of Summit's stock as collateral for a $10 million loan, then defaulted. Western, which held the loan, told regulators it now owned Summit. The government, already unhappy with Western, took control of the thrift, eventually merging it with seven other failed institutions in 1988. At the time, Summit's losses were estimated at $153 million.

Some of the criminal referrals to the FBI described what appeared to be direct transfers of more than $100,000 in Summit funds to Roberts' personal accounts, and the thrift's hidden purchase of an asphalt-paving company owned by Roberts and another thrift officer. But Houston was most hopeful about a referral on a $4.5 million Summit loan to Jackie E. Hinson, who ran a private jet hanger, to purchase a Gulfstream 2 jet.

The whole transaction seemed fishy. Hinson's loan application was dated six months after the loan was approved.

Thrift officials told the regulators Summit owned a single $1.3 million jet, but Summit's insurance policy indicated that it was paying premiums for three corporate jets, plus a jet helicopter and a turbo-prop plane. Did Summit have a secret fleet of planes for Roberts' use?

The weekend before the statute of limitations ran out for some acts, the prosecutor and the agent holed up in the task-force office, refining the indictment. Partly out of fear of losing the jury, Adams had decided against two of the four transactions that Houston investigated, the agent said. But the prosecutor said he liked the ``sex appeal'' of the airplane scheme.

The 38-count indictment charged Roberts with arranging for Hinson to buy the jet for him, then funneling Summit funds to Hinson to make payments on the Summit loan. Roberts was also charged with arranging a $95,000 loan to Hinson to refurbish the plane and with using the proceeds of other Summit loans to make payments on a Lear jet.

Two weeks after the indictment, he decided to plead guilty to one count of bank fraud and one count of misapplication of funds, in exchange for the prosecutor's agreement to drop the other counts. In short order, Roberts was testifying before the grand jury about Sunbelt and Western.