'Saga of greed' told at trial of former S&L officials Trial begins for 2 from Community S&L

3rd has fled.

December 03, 1991|By Kelly Gilbert | Kelly Gilbert,Evening Sun Staff

A federal prosecutor described Community Savings and Loan as "a cash cow" for former chairman Tom J. Billman and two associates as a much-postponed criminal trial finally got under way -- without the star defendant -- in U.S. District Court here.

Assistant U.S. Attorney Barbara S. Sale said in court yesterday that Billman, Clayton C. McQuistion, Barbara A. McKinney and Crysopt Corp., a Billman holding company, perpetrated "an ugly saga of greed and opportunism" that stripped millions of dollars from the thrift and caused its collapse in 1985.

McQuistion, a former Community principal and Billman's business partner; McKinney, former Community vice president and legal counsel; and Crysopt Corp. are defendants in the trial. The proceeding, which is expected to last three to four months, had been postponed six times to allow defense attorneys to prepare for it.

McQuistion, McKinney and Crysopt are charged with conspiracy and multiple counts of wire and mail fraud.

Billman, Community's former chairman and alleged mastermind of myriad frauds, is charged in the same 19-count indictment. But he is a fugitive, the subject of a $200,000 reward and a federal bench warrant issued after he fled to avoid paying a $112 million civil judgment against the principals in Montgomery County Circuit Court in 1988.

Billman narrowly eluded authorities in Spain last year and is believed to be living in Europe on $22 million he put into a Swiss bank account before he disappeared. He also is charged in a separate indictment with making false statements and using false identification to obtain a passport under an assumed name.

Sale, in her opening statement yesterday, told Chief Judge Walter E. Black Jr., who is trying the case without a jury, that the defendants concocted numerous complicated financial deals to systematically rake off millions from Community and line their own pockets at the depositors' expense.

Among Community's victims who are to testify at the trial are a former chief executive of a small credit union, the manager of a health maintenance organization, a retired businessman and his wife who put their life savings into the thrift and a teacher who deposited the operating capital of a children's school in Community before it collapsed, Sale said.

The criminal charges stem from activities that occurred after Community's 1983 merger with Equity Programs Investment Corp. (EPIC), a Crysopt real estate syndicate that invested money for limited partners in a wide range of housing ventures nationwide.

Sale said the defendants arranged millions of dollars in unsecured loans from Community to EPIC and the limited partners to pay the debts on the houses, which it rented at below-market prices.

During the life of the alleged conspiracy, Billman and McQuistion, aided by McKinney, paid themselves millions of dollars in unearned dividends, Sale said. But the scheme collapsed under the burden of enormous debt when the housing market sagged and EPIC was unable to sell the properties at a profit.

While that was happening, the prosecutor said, McQuistion destroyed a damaging financial report, and he, Billman and McKinney hid the true status of their businesses from depositors.

"The defendants never understood that they couldn't use depositors' money as their own," Sale said. "They took the life savings of people who depended on them and used the money to prop up a tottering empire."

Mark H. Tuohey 3rd, McQuistion's defense lawyer, told Black the government must prove beyond a reasonable doubt that the defendants intended to defraud Community's depositors.

Tuohey contended that the defendants made "complete disclosures" about their transactions to independent auditors and state regulators who oversaw the thrift's operation, and made legitimate business decisions based on advice from a wide range of financial experts.

"The decisions that were made reflected good judgment based on the changing business environment," Tuohey said of the EPIC-Community relationship. "There was no intentional concealment of anything."

Other defense lawyers reserved their opening statements until later in the trial.

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