Trial begins for 2 indicted in thrift failure Community S&L raided for cash, prosecutors say

December 03, 1991|By M. Dion Thompson

After nearly two years and numerous delays, two officers of a failed Maryland thrift went on trial yesterday in U.S. District Court in Baltimore on charges of conspiracy, and mail and wire fraud -- actions federal prosecutors allege led to the collapse of Community Savings and Loan.

The defendants, Clayton C. McCuistion and Barbara A. McKinney, are two of three people indicted in the case. The alleged mastermind, Tom J. Billman, fled the country in 1985, taking with him millions of dollars, prosecutors said.

In her opening statement yesterday, federal prosecutor Barbara S. Sale outlined a series of allegations that amounted to classic 1980s financial adventurism involving high-rollers whose real estate scheme got out of control, depositors left with empty accounts, and a once-stable company ruined and placed under state conservatorship.

"It is a tale of greed, expediency, opportunism and Las Vegas-style risk-taking," she told Judge Walter E. Black Jr.

The government alleges that the defendants diverted more than $106 million from Community Savings and Loan and used the money to prop up companies founded by Mr. Billman and Mr. McCuistion. Another $28 million was diverted for the personal use of the defendants and their Delaware-based corporation. These actions, Ms. Sale said, violated the trust depositors placed in the bank.

"What's the one thing you expect when you put your money in a bank? You expect it to be safe," she said. "[The defendants] never understood that the depositors' money was not theirs to play around with."

Though the government alleges the conspiracy began in April 1984, prosecutors have traced the defendants' involvement with Community to October 1982, when Mr. Billman and Mr. McCuistion took control of the Montgomery County thrift. Ms. Sale said the pair bought the S&L to provide a steady source of income for their debt-ridden real estate concerns. After the sale, she said, the bank "essentially stopped functioning as a bank and became a cash cow."

But defense attorney Mark Tuohey, who is representing Mr. McCuistion, characterized Community in 1982 as a losing proposition that posted more than $800,000 in losses that year.

"Bottom line was Community Savings and Loan needed an infusion of capital," he said in his opening statement. His clients enabled Community to compete with larger thrifts, Mr. Tuohey said.

He also argued that the defendants' decisions were typical of the business climate of the time and that they did not attempt to deceive regulators or commit fraud.

Mr. Tuohey also discounted any idea that depositors who lost money were victims. The depositors were risk takers, he said.

The government says that among those depositors were a retired couple who lost their savings, a small health maintenance organization and a school that had placed all of its operating capital in the thrift. Some of those depositors are scheduled to testify during the four-month trial.

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