Thrift investigator in Maryland joins national probe


October 19, 1992|By David Conn | David Conn,Staff Writer

"We believe that the three major causes of the crisis were: a total absence of regulation of savings and loan associations; individuals in the industry who took advantage of the absence of regulation to expropriate depositors' money for their own uses in violation of the law; and a hopelessly flawed system which permitted the industry to make and enforce its own rules."

--Preston Report

If that sounds like a summary of the nation's savings and loan debacle, it's just further proof that Maryland really is "America in Miniature."

The scathing description of a thrift industry hell-bent for collapse comes from the locally famous "Report of the Special Counsel on the Savings and Loan Crisis," a 457-page document that attorney Wilbur D. "Woody" Preston Jr. and a team of investigators researched and wrote in six frantic months back in 1985 and 1986.

Seven years later, now that he is 70 years old and starting to think about retirement, Mr. Preston has been called into service once again on behalf of the taxpayers, who stand to pay more than $150 billion for the nation's failed savings and loans.

Because of his work for Maryland, as special counsel to the governor, Mr. Preston was asked last month to be legal adviser to the newly created National Commission on Financial Institution Reform, Recovery and Enforcement.

The commission is expected to report its findings to Congress and the president. It will try to find the causes of the national savings and loan debacle and recommend "regulatory reform," Mr. Preston said. "To that extent, it's the same as the principal job I had in Maryland."

According to commission members, no one could have been better suited. Mr. Preston, chairman of Whiteford, Taylor & Preston, a 132-attorney Baltimore law firm, "was sort of a natural" for the new panel, said John W. Snow, commission co-chairman and the chairman and chief executive officer of CSX Corp. in Richmond, Va.

Not only did Mr. Snow know of Mr. Preston's work with the Maryland thrift crisis, but the Baltimore lawyer had represented CSX in various matters over the years.

For his part, Mr. Preston downplays his role with the new $H commission, which has met several times, and plans to have an initial draft of its report by its Dec. 10 meeting. He won't play the same role as he did in 1985; it's unlikely, for instance, that he'll have a hand in writing the new report.

He and three other Whiteford attorneys, Gerard J. Gaeng, Lisa A. Kershner and Timothy F. Cox, have spent much of their time studying the relationships between federal and state laws, and overlapping regulatory jurisdictions.

But Mr. Preston will get a chance to dust off some of his old skills.

"I'll be involved in interviewing the witnesses and conceivably examining documents," he said. "As a result of what happened in Maryland, I think I'll have a pretty good idea of what conflicts of interest look like in the management of individual savings and loans."

Mr. Preston said he is still a bit shocked by what his team of four attorneys, one policeman and several staffers discovered about Maryland's savings and loan industry and its paper watchdogs.

"I guess the most amazing thing to me was when we discovered that a lot of this had been going on for seven or eight years, and that the [state] division of savings and loan had been warned," but did nothing, he said.

For a time, Mr. Preston was a Maryland celebrity, and he still brightens at the memory of being in the spotlight.

"We were all excited -- it was on everyone's mind in the state of Maryland," he said.

But he told a reporter soon after the "Preston Report" was published that though he got a "kick" out of being in the limelight, "I would never want to make a career out of it."

Instead, Mr. Preston quietly and steadily built one of the most respected legal practices in his native Baltimore.

He attended Western Maryland College before and after a stretch of service in the Army during World War II, during which he joined the occupation force in Japan after V-J Day.

Taking his father's advice not to pursue professional baseball -- although clearly not without some regret -- Mr. Preston attended the University of Maryland law school and then worked for a small Baltimore firm for a few years.

In 1951 he joined the firm of Dewey, Nickerson and Whiteford and has stayed there ever since, through various changes, including the one that added his name.

Mr. Preston has joined or headed most of the major legal organizations in the state. He was president of a Baltimore young lawyers group in the 1950s, headed the Bar Association of Baltimore City and the Maryland State Bar Association in the 1970s, and was vice chairman of the Client Security Trust Fund, which reimburses victims of unscrupulous lawyers.

The father of four sons, Mr. Preston remarried last year after his first wife died. Following his stint with the savings and loan commission, he expects to work for a while longer at Whiteford.

"I'm certainly going to work next year," he said. "Beyond that I'm goingto see how my partners feel.

"If I feel like I do now, I'm going to keep working," he assured.

After that, Mr. Preston said he looks forward to spending time with his grandchildren, at his house in Delaware's Bethany Beach, and at Oriole Park at Camden Yards as much as he can.

"I'm a great believer that life begins on Opening Day," he said with a smile, and the longing of a baseball fan in the off-season.

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