Ex-Owner Is Indicted in Collapse of Vernon S&L; : Thrifts: Don Dixon gave the Texas institution’s money to prostitutes and politicians, the government says. The mess could cost taxpayers $1.3 billion.

WASHINGTON —  A flamboyant former Texas savings and loan owner was charged Wednesday with using the thrift’s money to contribute illegally to powerful politicians and to pay prostitutes.

The federal indictment accuses Don R. Dixon of 38 criminal counts in the collapse of Vernon Savings & Loan in tiny Vernon, Tex.--a debacle that could cost taxpayers as much as $1.3 billion in one of the most expensive thrift failures ever.

The charges include allegations that Dixon used company funds to make illegal contributions to 13 politicians and committees. Among the recipients were Sen. Alan Cranston (D-Calif.), Rep. Bill Lowery (R-San Diego), former House Speaker Jim Wright (D-Tex.), former House Democratic Whip Tony Coelho (D-Merced) and former Rep. Jack Kemp (R-N.Y.), who is now secretary of Housing and Urban Development. The government said there is no evidence the recipients knew that the contributions were illegal.

Wright’s attempt to intercede with federal regulators and delay the government’s seizure of Vernon in 1987 was part of the congressional investigation that led to Wright’s resignation. Testimony in the inquiry indicated that Wright contacted regulators after Coelho called him on Dixon’s behalf. Coelho later resigned over unrelated matters.

“Today’s indictment is the latest and most significant case developed out of our savings and loan investigations in the Dallas area,” said Atty. Gen. Dick Thornburgh, who announced the indictment after it was returned by a federal grand jury in Dallas.

Thornburgh praised the investigators heavily in what appeared to be a response to congressional criticism that the Justice Department has not moved quickly or vigorously enough to prosecute S&L; wrongdoers.

Eight former Vernon executives have been convicted in the 3 1/2-year investigation. Dixon faces up to 190 years in prison and fines of $9.5 million if convicted of the charges, which include conspiracy, fraud and interstate travel in aid of racketeering. His Dallas attorney, Billy Ravkind, did not return a telephone call Wednesday.

Dixon, who once had his face printed on phony $3 bills, was a Dallas real estate developer when he bought Vernon in 1982. The thrift had $82 million in assets and no bad loans at the time.

When Vernon was seized by regulators five years later, its assets had exploded to $1.4 billion, and the government said 96% of its loans were in default. The majority of the new loans were to risky real estate ventures.

Roy Green, the former top federal regulator in Texas, told a congressional hearing in 1989 that Vernon was the worst run, worst managed “debacle” that he knew of in the savings and loan industry.

In examining the books at Vernon, regulators found a catalogue of high living that became a symbol for the transformation of the sleepy S&L; industry in the 1980s. The examiners found that Vernon’s money had been used to purchase a $2-million oceanfront house used by Dixon in Del Mar, and to rent another house in Solana Beach, both just north of San Diego.

A $540-million civil lawsuit filed by regulators against Dixon accused him of many abuses, including using Vernon’s money to pay for a 10-day tour of Europe with his wife in 1983. The trip included stops at seven three-star restaurants.

Dixon later defended the trip, telling a reporter: “You think it’s easy eating in three-star restaurants twice a day, six days a week?”

The thrift’s money was used to buy a Rolls Royce and Ferrari dealership in La Jolla, the sister ship to the former presidential yacht Sequoia and a fleet of five aircraft. Passengers on the aircraft included a number of politicians, from former President Gerald Ford to Wright and Coelho.

Wednesday’s indictment charged that Dixon and other Vernon officials engaged in a conspiracy of “currying favor and influence” with politicians and a former Texas S&L; commissioner, L. Linton Bowman III, to try to head off a crackdown by regulators.

The indictment said the attempts included illegal campaign contributions and hiring prostitutes and female companions for members of the Vernon board and Bowman, who was not identified in the indictment.

Dixon arranged for $421,000 in Vernon money to be used to pay rent on a beach house at Solana Beach, where he hosted a party for members of the S&L;’s board of directors, the indictment said.

Prostitutes who attended the party and a yacht cruise in San Diego Harbor were paid $10,500 belonging to Vernon through a subsidiary that Dixon had set up, according to the charges.