Hyde has been predicting for two years that it would be dismissed
(AR) CHICAGO -- As the Whitewater investigation involving the failed
Arkansas S&L and the Clintons drags on, another expensive S&L failure,
touching a highly-placed politician, has been ignored by the national
press and the Congress.
Rep. Henry Hyde (R-Illinois), the silver-haired Republican from the Chicago suburbs who chairs the House Judiciary Committee and the joint Senate-House conference committee on legal reform, being sued for gross negligence in U.S. District Court in Chicago because he sat on the board of an S&L that failed -- at a cost to taxpayers of $72 million.
A federal judge ruled in late December that the case must go to trial, even though Hyde has been predicting for two years that it would be dismissed.
Hyde's S&L is one of over 100 Illinois thrifts that collapsed in the 1980's with $3.5 billion in losses. Many had ties to prominent politicians of both parties, who in turn had connections with regulators and trade associations.
While Hyde's S&L was hemorrhaging money, Hyde was making money
story is intriguing. While a Congressman, he served on the
board of Clyde Federal S&L from 1981-84, where minutes from the meetings
show him actively voting and making decisions.
During Hyde's tenure, the board lent $5 million to a condo project whose loan broker was the notorious Californian J. William Oldenburg, who later was tried for defrauding a Salt Lake City S&L of $26 million.
Oldenburg was charged with fraud by the Securities and Exchange Commission before Hyde's S&L ever got involved with the condo project, which, perhaps predictably, failed. Oldenburg also worked with a California S&L said to be connected with organized crime, according to "Inside Job, the Looting of America's Savings and Loans," by Steve Pizzo, Mary Fricker and Paul Muolo.
The lead lender for the condo project, on the Gulf Coast of Texas, was Guarantee Savings and Loan Association of Harrison, Ark., a small-town thrift that used Oldenburg to make risky, out-of-state loans.
That little S&L plunked $52 million into 16 loans packaged by Oldenburg, according to an article in an Arkansas business magazine. The S&L's failure cost $82 million.
Hillary Rodham Clinton's Rose law firm worked on that S&L failure, said Ken Siekman of Oklahoma City, who was involved with the condo development.
Hyde has refused to say whether he ever knew Oldenburg, who was known for throwing outdoor lavish parties where helicopters rained orchids on guests.
Hyde also was heavily involved in his S&L's venture into options trading, board meeting minutes show. The lawsuit against the S&L, filed by the Resolution Trust Corporation, termed the options trading "risky," and states it violated federal law. The S&L lost $10 million trading options.
Hyde also has refused to discuss the options trading. But board minutes show him voting five times to speculate on the financial futures market and on options transactions. He seconded one of the motions, and attended at least four meetings for discussions of these topics.
He also voted to send the thrift's lawyer and auditor to Washington, D.C., to seek an administrative hearing concerning options trading after regulators criticized the trading.
Hyde's S&L used the same Chicago commodities trading firm, Refco Inc., that was scrutinized for helping Hillary Rodham Clinton make $100,000 from a $1,000 investment.
While Hyde's S&L was hemorrhaging money, Hyde was making money. His annual pay for serving on the board, about $4,000, was only the beginning.
He seconded a motion to allow below-market-rate mortgage loans to officers, directors and employees of the thrift, and moved to increase the interest rate on deferred compensation for Clyde S&L head Sylvia Miedema, and then voted for it.
Meanwhile, she was a regular contributor to Hyde's campaigns, and gave him $750 four months after that vote. During the 1980s, she gave him a total of $5,850, campaign contribution records show.
After he left the board, Hyde become a spokesman in Washington opposing S&L regulation. In the 1980's, his campaign took in $115,000 from the financial industry, including some from failed S&Ls and their executives, records show.
Members of Reagan's Cabinet, other top officals also allegedly involved
one of three prominent Illinois politicians serving on
failed S&L boards in the 1980s while they held public office.
Republican Congressman Ed Madigan of Lincoln served on a Chicago- area S&L board for nearly a decade, and allowed taxpayers to pay for his trips to the meetings, travel records show.
Madigan resigned when he was named U.S. Secretary of Agriculture. But he left Congress with $500,000 in campaign funds, including at least $110,000 from the financial industry, failed S&Ls and their executives.
Madigan's S&L also hired Hyde's son as a manager.
Another member of Reagan's cabinet, Edward Derwinski of Illinois, Secretary of Veterans Affairs and a former Congressman, sat on his S&L board while a top official in the State Department, and even met once with the board while he was a member of the Cabinet, two days before Congress voted on the original RTC bailout legislation.
Records show he was paid $1,250 for attending the meeting. But he never reported the money on his financial disclosure forms, where he claimed he was inactive and uncompensated.
In a telephone interview, Derwinski said he only had dinner with his old friends, and did not attend the meeting or discuss legislation.
The Illinois connections also involve Democrats. Relatives of the head of the U.S. League of Savings Institutions sat on the board of a Skokie S&L, where relatives of Rep. Frank Annunzio, third-ranking Democrat on the House Banking Committee, also were on the payroll.
Kathleen Day details these connections in her book "S&L Hell," also reporting Annunzio once was in business with a "suspected mobster" who had close ties to Sam Giancana.
At Libertyville S&L, also in the Chicago suburbs, $20 million was lost, while several wealthy directors were allowed to settle a lawsuit quietly for only $6 million. The federal judge in that case, Judge Harry Leinenweber, is married to former Labor Secretary and Republican Congresswoman Lynn Martin.
Chicago suburb, Chicagoan Joe Grosz, alleged to be a
mob associate, bought control of Home Savings of Waukegan with $1 million
he was accused of fraudulently obtaining from a Kansas S&L that failed.
The lawsuit against Grosz alleges he and others persuaded the Home Savings board to spend S&L money on junk bonds of Las Vegas casinos, financed through Michael Milkin's Drexel Burnham Lambert empire, investments which lost millions.
The Chicago law firm that approved these transactions had a partner named Herbert L. Stern, Jr., husband of Democratic State Sen. Grace Mary Stern. He's a defendant in the lawsuit against Grosz and others.
Grosz is an Illinois link to the notorious national S&L scandal involving Charles Keating, Herman Beebee and other convicted criminals. He's been convicted of bank fraud at San Jacinto S&L in Houston, which he ran for Beebee's Southmark Co.
The law firm sued in civil court over losses at San Jacinto S&L is Akin, Gump, Strauss, Hauer & Feld, where former chairman of the Democratic National Committee Robert Strauss is a partner. Strauss also was a business partner with James A. Baker III and friend of former President George Bush, who named him U.S. Ambassador to Moscow.
Though such links could keep an army of investigators busy for decades, the Resolution Trust Corporation went out of business on December 31, turning its files over to the Federal Deposit Insurance Corporation. That agency could drop the lawsuit against Hyde, and is said to be unlikely to investigate Illinois any further.
The RTC records on the failed S&Ls, seized when they took over the institutions, were boxed up and sent to a Kansas City warehouse more than a year ago. A freedom of information request to the RTC asking about the fate of these records has never received a response.
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