Vernon's lavish living

Don Dixon, a former real estate developer, bought into Vernon savings and loan by offering $5.8 million for Vernon's outstanding shares from existing owners, the money being loaned to him by his good friend of some years, Herman K. Beebe. Vernon, with $82 million in assets and just $90,000 in bad loans was reportedly one of the healthiest thrifts in the state of Texas. (Pizzo, p age 191) By 1986, Vernon would report assets of $1.3 billion.

Regulators, "who had begged entrepreneurs to step in and save the ailing thrift industry," were delighted. Vernon was quickly added to their published list of 'High Performance Associations'. "Vernon was just one more shining example of what American business could do when government got out of its way," they said. (Pizzo, page 193) The reality, however, proved a little different.

Don Dixon and his wife, Dana, divided their lifestyle between a luxury ski resort in the Rocky Mountains and a $1 million beach house north of San Diego. Vernon paid $1.9 million for the swiss-style chalet, made of stone, where chalet owners were transported to the lifts in chauffeured limos including a service of coffee and doughnuts on the way to the lifts, champagne on the way back. "They went on luxury vacations across Europe, including one adventure they called 'Gastronomique Fantastique', a two-week culinary tour of France coordinated by Philippe Junot, former husband of Princess Caroline of Monaco, and paid for by Vernon. Dixon purchased a 112 foot yacht for $2.6 million, with which he wooed members of Congress and regulators on extravagant boating parties. To pay for all this, Dixon set up intricate networks of subsidiary companies for the express purpose of making illegal loans to himself." (Calavita, page 25) Defending the overseas trips as a necessary part of business, Dixon later said: "You think it's easy eating in three star restaurants twice a day six days a week ?"

Regulators later pointed out that Dixon had used the thrift to take money from brokered deposits and then channel it towards his holding company, Dondi Financial Corporation. Once there, explained Calavita further: "Dixon could use federally insured deposit money to fund whatever venture he and his associates could conjure up, which usually involved adding commercial real estate to the already glutted Texas market."

One might have thought however that a few warning sings of a glutted market could have been noticed by Dixon, since he and a former developer partner had been busted by the 1973 property downturn, but it was not to be. Greed no doubt blinding some to the obvious: from the up-front fees charged on the real estate and land loans made on over-inflated property values, large bonuses could be paid to thrift owners and officers. Vernon paid $22 million to its owner, being Don Dixon. Dixon was known to flip land as if it were pancakes. (O'Shea, page 76.) Usually done over breakfast.

When Vernon was finally closed down in 1987, an unbelievable 96% of its loans were found to be overdue or in default (Time, June 25, 1990) and $1.3 billion in federally insured deposits had disappeared , which the government would have to reimburse. In the end taxpayers footed the bill. Said one FSLIC attorney: "If you know the Vernon story, you know three percent of what happened in Texas." (Pizzo, page 228)

"The real tragedy in Vernon Savings," said one of its officers, Woody Lemons, after he had done some jail time for the frauds, "is what it did to (the town of) Vernon. So many people depended on us. We employed a lot of people and we were a big taxpayer. So it affected a lot of lives and the community as well." (Interview, Times Record News, Jan 5, 1998.)

Follow up references:

Calavita K., Henry Pontell and Robert Tillman, Big Money Crime: Fraud and Politics in the Savings and Loan Crisis, University of California Press, 1997.

Good Ole Bad Boy, Time Magazine, June 25, 1990

How to Rob Banks without a Gun, Time Magazine, Aug 15, 1988.

O'Shea J., Daisy Chain: How Borrowed Billions Sank a Texas S&L, Pocket Books, 1991.

Pizzo, Stephen, Inside Job: The Looting of America's Savings and Loans, McGraw Hill Publishing Company, 1989.

Vernon S&L Scandal a Memory, Times Record News, Jan 5, 1998

Copyright: Phil Anderson, 2004

Print This Page

Home ----- Contact Us