Wednesday, October 12, 2011

USOC: Banning Lewis Ranch

Hi everybody:

Wow, something I wrote must have really touched someone's nerve, because I've been getting all kinds of interesting fan-mail.  Keep it coming, y'all.

And so I started looking backwards again...back to when it all started.  Who were "the Driggs boys"?  Whatever became of Western Savings and Loan?  I looked at the data again, looked at it differently; I looked up Driggs and Western Savings and Loan -- sure enough, Mitt Romney's name came up almost immediately with regard to 1985-1990 timeframe and Frank Aries.  20 years later, Romney was a key player in the Salt Lake City Winter Olympics of 2002 - in case you've forgotten, there was a great big USOC bribery scandal that year...

Probably just a coincidence that both the Driggs and Romney names show a significant Colorado presence...and also come up in conjunction with a company called "Ra Technologies" - as in "The Eye of Ra" as in "America the Beautiful Park" I said - probably just a great big coincidence.

Don't know the answers yet; I keep posting the information I find, however, in hopes that there might be others looking into this information along with me.


At the bottom of the post "Greed Acres" (Originally posted 4/10/11 and 7/2/11) is an article I came across today..."Those Poor Driggs Boys" and their golden parachutes.  Enjoy.

p.s. - on the photo below of Banning Lewis Ranch...does anyone recognize the "CS" logo in the lower right-hand corner?  

The area without buildings is Banning-Lewis Ranch

Greed Acres
The massive Colorado land venture that turned the Driggs boy's Rocky Mountain high into an all-time low.
By Andy Van De Voorde
published: January 03, 1990

Colorado developer Frank Aries had no intention of carving out another piece of ho-hum suburbia when, in 1985, he went calling on the Driggs boys, the freewheeling moneylenders at Phoenix's Western Savings and Loan.

The land sultan of Colorado Springs, fresh from a slick parceling of the old Howard Hughes estate in Tucson, was out to build a living monument to his own ingenuity, a master-planned community on a scale with Del Webb's desert retirement havens or the great orange-belt developments of Southern California.

Aries, who drove a Rolls-Royce, lived in a $1.6 million home in the ritzy Broadmoor district of Colorado Springs and liked to brag about the multimillion-dollar sailboat he had his eye on, was not a man who thought small. He envisioned 25,000 acres of homes, schools, industry, shops and golf courses surrounding the old Banning-Lewis Ranch east of Colorado Springs. The blueprints even called for upscale anchor projects: a plush new headquarters for the U.S. Space Foundation, complete with a $3 million big-screen IMAX theatre, and alongside it a high-tech Olympic Hall of Fame peopled with the talking ghosts of champions like track-and-field great Jesse Owens.

All Aries needed to pull off the deal was $240 million of somebody else's money.

The high rollers at Western, who had already sunk millions into gambling casinos in Las Vegas and Atlantic City and huge tracts of desert land, were happy to oblige.

So were the members of the United States Olympic Committee. After all, Aries was offering to deed them 150 acres of the land he'd bought with the thrift's money and, to sweeten the pot, build a major parkway and other amenities.

The Phoenix thrift wasn't the only publicly backed entity enamored of the developer's Shangri-la. The city of Colorado Springs also got in on the act, swallowing the entire property in the largest annexation in state history.

Everybody was a winner--until they all crapped out.

Today the Banning-Lewis Ranch property sits vacant, king turkey in a Colorado real estate market filled with birdbrained schemes. Banning-Lewis is the largest single parcel in the Resolution Trust Corporation's entire national inventory and may be the most spectacular challenge facing the federal agency, which is charged with putting the nation's savings and loan industry back together again.

The Olympic Committee's promised infrastructure is nowhere in sight. The USOC still has the land Aries donated. But it only gets to keep the acreage if it actually builds a Hall of Fame there, an increasingly iffy proposition. Plans for the Space Foundation's new digs are up in the air, too.

Colorado Springs is stuck with a dead weight on its tax rolls that must be patrolled by the police and fire departments. Officials are even toying with the idea of de-annexing whatever land they can.

Western Savings is insolvent, having been seized by federal regulators several months ago. And the Driggses, who ran the thrift for decades, were tossed out by their shareholders--though they fell to Earth gently, thanks to golden parachutes.

Viewed in retrospect, the Banning-Lewis deal takes on an almost surreal quality. Aries' willingness to pay top dollar for raw land in a time of economic uncertainty and Western's blind faith in the bet-it-all principles of Sun Belt real estate are straight out of a financial fairy tale. But they raised few eyebrows in the wild and woolly mid-Eighties, when land was being bid up by speculators seduced by the old saw that you can't get hurt in dirt. Most of them, including the shareholders of insolvent Western, wound up buried to their necks in it.

But not Frank Aries. The remarkable loan agreement he worked out with Western saw to it that he wasn't personally responsible for a dime of the money. At last word, the 56-year-old Aries was making plans to sail "probably all over the world." Speaking from his 98-foot sailboat in Miami Beach, Aries told the Denver daily newspapers last month that he's also selling his Colorado Springs home and moving back to Tucson. "I plan to retire, but not until next fall," he told reporters.

As Aries sails off into the sunset, Western Savings is now under the control of the government's thrift bailout agency, the RTC. The taxpayers will pick up the tab.

THE SHEER SIZE of Western's loan to Aries still boggles the brains of banking experts.

"It's the largest loan I have ever seen to a single borrower in any institution," says Bob Stallings, Western's new chairman. Anthony Scalzi, the boss of the RTC's western region, has referred to it as "a doozie." "I'd say it violated some principles of sound financial operation," notes the federal overseer, who tends to wear his sarcasm on his sleeve when discussing his bulging portfolio of loser loans.

From his office in downtown Denver, Scalzi presides over a territory that runs north from New Mexico to Washington and east from California to Montana. Referred to by some as the "wild, wild West" in honor of its quick-draw lenders, the region boasts such notorious money-losers as Charles Keating's Lincoln Savings and Colorado Silverado Banking. Institutions such as these turned the making of bad loans into an art form. But none of the bowsers on Scalzi's balance sheet can top the Western Savings' Banning-Lewis blunder.

It's not hard to see how the deal took shape. Thanks to the deregulation of the industry by Congress in the early Eighties, nobody was around to slap Western's paw when it began groping into the cookie jar.  The recently enacted S&L bailout legislation limits a single borrower's loan amount to 15 percent of a lender's regulatory capital, but that wasn't the case in the go-go days of 1985.

In those heady times, says Scalzi, thrifts could loan up to 100 percent of their regulatory capital--and they were allowed to calculate that figure by using a sleight-of-hand accounting trick known as "good will," whereby the estimated worth of the institution's market position and reputation could be counted as an asset.

"You might as well put it on the books as `wild-ass guess,'" says one accountant about "good will," which thrifts can no longer use to their advantage. The $240 million given to Aries probably approached Western's legal lending limit, Scalzi says--meaning Arizona's second largest S&L stood to suffer irreparable damage if the loan fell through.

Western, however, was an institution known for spreading money around in titanic amounts and asking for few assurances in return. Its wonderboy operators, Gary, Douglas, and John Driggs, were "the foresight people," according to their long-time ad campaign. They were the darlings of the city and hosted regular "community forums" to laud the Valley of the Sun's economic potential. Their bell-and-whistles approach certainly would have caught the eye of Aries as he worked on the Hughes property in Tucson and dreamed of bigger things.

Outside Phoenix, though, Western's reputation was less sterling. Publications from Forbes to the New York Times raised doubts about its free-spending ways. The more caustic Barron's accused Western of Evel-Knievel lending and Alice-in-Wonderland accounting. And even in Western's crazy-quilt portfolio, the Banning-Lewis deal stood out.

To begin with, the Aries loan was made on a non-recourse basis, meaning that, in exchange for being cut in on a percentage of the development future profits, Western agreed not to look any further than the land for collateral on the loan. When the deal fell apart, the extreme riskiness of the thrift's position became obvious: In exchange for $240 million in federally insured deposits, Western got thousands of acres of mostly barren ranchland in the heart of Colorado's free-falling real estate market.

Like Aries, the Driggs brothers had taken measures to cushion their fall. They were booted out by shareholders shortly before Western was seized by federal regulators last June. A golden parachute arrangement awarded Gary a reported $3 million in benefits. His brothers got only slightly less than that--and threatened to sue if they didn't get more.

THERE WILL BE NO parachutes for the nation's taxpayers, who'll have to cover the cost of Banning-Lewis. And the prospect of a public backlash has made Western and its client anxious to put the best face on a rapidly deteriorating situation. Frank Aries did not respond to Westword's interview requests.

His chief assistant, Aries Properties president Steve Douglas, is happy to take up the challenge. Douglas acknowledges that his company couldn't pay back the loan. But he says, "the loan was paid back, in the sense that we gave them the property in return for their canceling it."

It is an argument few would dare to make before a college economics professor. But don't tell that to Douglas, whose continued defense of his firm's behavior includes the much-underlined observation that Aries Properties never actually defaulted on the loan. Instead, Douglas prefers to describe the title transfer that took place last summer as a "transaction." (Douglas also insists the amount of the loan was $220 million; Western listed the amount as $240 million in papers filed with El Paso County, Colorado, authorities.)

Western boss Bob Stallings hesitates when asked just what happened. It's true the thrift took back the land last August after it became clear Aries couldn't pay back the loan, he says. But "foreclosure" is such a nasty word. "I think what it was was a cooperative workout of the loan where the borrower relinquished the collateral back to the lender," he says. "I don't know what the legal proceedings were." Stallings is particularly impressed that Aries turned the title over without a struggle. "The difference is, a great percentage of those kinds of transactions are done in a hostile environment," he says.

And the relationship between Aries and Western has been anything but hostile, even though they teamed to create the biggest bum deal in the history of Colorado real estate. Take, for example, the matter of the developer's debt service. Aries Properties was current on its payments when it handed the title back to Western, says Douglas; the company he claims, got the cash from the early sale of a handful of Banning-Lewis parcels to investors.

Other observers, though, find it hard to believe that land sales generated that much money. They say a cozy deal between Aries and Western allowed the developer to use loan funds to meet monthly payments--in essence, mailing the thrift's money back to it. A well-placed source inside Western confirms such an arrangement.

The practice would have been entirely legal, and not uncommon among the highflying thrifts of the mid-Eighties. Yet, this was no common loan; sources say it was the largest amount of money Western had ever given a single borrower. Why would the thrift have offered such generous terms on a deal that could conceivably obliterate its operating capital? "These were people anticipating Frank would make a profit and they'd get a percentage of that profit," says Colorado Springs developer Steven Schuck, a former GOP gubernatorial candidate who's also been hit hard by Colorado's land bust. "That was their motivation for keeping Frank alive and continuing to fund the project. They weren't stupid and they weren't throwing good money after bad; they were simply pursuing their own greedy interests."

Greed apparently also dictated Western's decision to be the only lender on the project. The aggressive move was predicated on the gambler's theory that you have to bet big to win big. But the payoffs were part of a distant future; some sections of the Aries master plan weren't scheduled to be built-out for forty years.

It was a calculated risk. But few gamblers play with chips covered by the federal government. Compared with Western's behavior, says Schuck, his friend Aries was downright prudent.

"I don't think the average guy on the street should fault Frank," he says. "He made the best deal he could. It was worth it to him to give away a piece of the potential profits in exchange for the lender funding the entire cost of the development. That was the deal. It was a quid pro quo."

Schuck adds, "We should direct our anger to the right target. I'm outraged, but not at Frank Aries. I'm outraged at Western for making that arrangement."

Steve Douglas is equally eager to lay the blame at Western's doorstep. As he tells it, his boss was just another victim.

"It's difficult to do a project of this kind when the backer goes through all the trials and tribulations they did about this time last year," he says. "Look at it this way: We assembled the property, did extensive planning utilizing the best consultants in the country, had just completed an annexation agreement with the city and were about to implement our marketing program, when all this stuff started to happen at Western. The way we view it is that we never really had an opportunity to get the project off the ground."

THAT MAY HAVE BEEN a blessing, for it now seems clear that Aries' master-planned Goliath eventually would have collapsed under its own weight, regardless of whose money was propping it up.

The developer had moved to Colorado from Tucson in the mid-Eighties specifically to put together the Banning-Lewis project. It was to be his greatest triumph, twice as big as his 13,000-acre undertaking in Arizona and backed by a can't-lose location on the eastern fringe of Colorado Springs.

His theory? Since Colorado Springs is hemmed in by the Rocky Mountains to the west, the Fort Carson military base to the south, and the 18,000-acre Air Force Academy to the north, future growth will inevitably be to the east, where the plains begin and the land is wide and flat.

®MDBO¯Western Savings feature

Between the fall of 1985 and the fall of 1986, Aries assembled an incredible block of land that, as Douglas puts it, forms "the whole eastern border of the city." Even by the standards of big-time developers, it was something to behold. "It was just one of those massive things that hadn't happened in Colorado," says Paul Turner, Colorado Springs director of research for the national real estate firm of Grubb & Ellis. "I can't remember a land mass of that size being sold in one fell swoop."

The Banning-Lewis parcel--named after its core property, the 20,000-acre Banning-Lewis Ranch--is fourteen miles long and four miles wide, a continuous swath that forms a wedge between the city and Kansas. Both major highways heading east from Colorado Springs pass through it. So, the reasoning went, must any future development.

The question is whether Aries was so convinced of the plan's perfection that he lost sight of financial reality. When he set out to buy the crucial Banning-Lewis Ranch property in 1985, the Colorado Springs area already was well on its way to being overbuilt. Yet he behaved more like a giddy shopper with a fresh paycheck than a shrewd horse trader. 

The fact is that Aries wasn't the first person to try to assemble a real estate monopoly on Colorado Springs' east side. Developers had imagined multi-use development on the land since the early Sixties; most recently, Aries had been beaten to the punch by Denver's Mobil Land Development Corporation, one of the oil conglomerate's many real estate subsidiaries. Jack Darnall, Mobil's vice president of marketing, says his company purchased the ranch in 1982 and was itself in the planning process when Aries came to call, checkbook in hand.

Mobil's normal strategy is to buy land in the path of development, get it rezoned and parcel it off to developers. "We're not in the business of flipping land over," says Darnall. After thirty years in the land business, the company believes that holding on for the long haul creates more profits than constant buy-low, sell-high speculation.

But when Mobil got a look at Aries' arithmetic, it did an about-face. The developer offered $80 million in cash for the ranch itself and another $12 million for 500 acres of adjoining properties, a price Darnall diplomatically describes as "considerably more" than what Mobil paid in 1982. (Darnall won't say how much Mobil spent on the land; sources say the ranch cost as little as $1,000 an acre, or about $22 million).

"We looked at our projections, at the additional money we would have had to plow into the project versus what we could get [from Aries]," says Darnall. "It didn't take too much head-scratching" to conclude that selling out would be more profitable than trying to develop the project. "By doing this, we reaped a lot of upside, without taking on more risk."

One reason Mobil was willing to part with the property, other than the incredible opportunity to quadruple its money in three years, was its belief that Colorado real estate was already sliding. "In our view, the market had started to deteriorate in 1982 and was on the downside in '85," says Darnall. "That wasn't a sentiment Frank shared when he made the acquisition."

Aries wasn't the only professional with a rosy outlook. Compared to the money other people were throwing around at the time, the prices he paid--including a whopping $41.3 million in 1986 for his other core property, the partially developed 3,400 acres known as the Colorado Centre--weren't necessarily out of line, says Grubb & Ellis' Turner. "Most developments are based on 50 percent fact and 50 percent hope," he notes.

But once the state's land bust caught up to Colorado Springs, there clearly would have been no hope for the Aries project. Even if Western had somehow managed to stay afloat, plunging property values would have cut the deal off at the knees by making it impossible for Aries to recoup his purchase price.

Chances are it will be years before anyone can. Experts say the Colorado Springs market is softer today even than sluggish Denver. "He wound up with 25,000 acres of land that might be needed in thirty years," says one broker. "Most of us will be dead in thirty years."

Mobil has held on to about 3,000 acres of the old Banning-Lewis Ranch, says Darnall, retaining a parcel adjacent to Western's plot. But "we're not likely to take the acreage into development anytime soon," he adds.

One needn't look far to understand why. Down the road at Aries' Colorado Centre development, an improvement district set up to provide it with roads and a fire station declared bankruptcy in early December after defaulting on $25 million worth of bonds. Aries had been subsidizing the district, which was supposed to pay off the bonds by collecting fees from developers. Those developers never surfaced--and when Western took back the land, it cut off the bond subsidies. The bond underwriters, Denver's Boettcher & Company, have tried for the last year to refinance the offering. But plummeting land values in the development, which includes about 150 homes and a scattering of commercial properties, have made that impossible.

The unfortunate souls who purchased homes in Colorado Centre's two subdivisions live in ghost towns, surrounded by vacant houses whose owners have left town and defaulted on their loans. Nancy Rathburn and her husband Jim bought their house in 1987, a year after Aries purchased the Centre. They live in fear of losing their home, which Rathburn says was automatically slapped with a lien when the improvement district went under. The couple is afraid that one day the district will try to impose the huge mill levy it approved before filing for bankruptcy--a bite estimated at $11,000 annually on an $85,000 house. "If they were to do that, we'd have no choice but to file for bankruptcy ourselves, or just walk away," she says.

Frank Aries' name comes up often at neighborhood meetings, Rathburn says. Some residents think the millionaire who acquired the community has a responsibility to make things right. The district board--whose president is Steve Douglas--quickly cleared up those misconceptions, she says. "They told us what Aries does does not concern us."

THE RTC IS LEFT with the unenviable task of cleaning up after Aries. Scalzi says his office is "working on a strategy," deciding whether to market the property as a whole or break it into bite-size pieces. The staggering size of Banning-Lewis is a major problem. If it's left in one piece, the result likely will be a fire sale; any developer with enough chutzpah to buy in today's market would assuredly demand a wide array of concessions. After all, there's still a buffer zone of developable parcels that stands between the city and the Banning-Lewis property.

Douglas, however, holds out hope that some day "the property will be developed as Frank foresaw when he got interested in this." Of course, he adds, "Everything that's happened may slow that up for a while."

Douglas' comments at times appear to have more to do with past dreams than present-day reality. But he likely sees reason for hope in Western's controversial decision to keep Aries on as a paid consultant. Douglas and Stallings both say the arrangement makes sense, since Aries knows the intricacies of the development and is in the best position to pull it out of the fire. "Frank Aries is without a doubt the most knowledgeable person on the face of the Earth about that project," says an effusive Stallings.

However, some people wonder how long the relationship will last now that Scalzi's RTC has taken control of Western. "My guess is that the RTC is going to have a hard time paying Frank any consulting fees," notes one observer. "They may have a policy of not doing business with people who have generated losses for the system, and obviously Banning-Lewis will create a major loss." Asked if he considers the consulting arrangement unusual, Scalzi says, "I could go either way on that."

Getting rid of Aries would seem to be easy enough; the hard part is what to do about the mess he made.

The first indication of the RTC's plans for a property should come when it issues a decision on what to do about the $10 million worth of roads and utilities that Aries promised the Olympic Committee;Western accepted that commitment when it took back the land, and Stallings has since reiterated that support with verbal assurances to the USOC. But it's uncertain whether the RTC will approve of dumping still more money into the project.

The members of the Olympic Committee are emphatic about what they want to see happen. "We simply can't go forward with our project if the site is not going to mature in a reasonable period of time," says USOC vice president Bill Tutt. The USOC wants the cash-poor RTC, which has seen its $50 billion in initial working capital swallowed whole by hemorrhaging S&Ls, to play developer. Even Tutt acknowledges that "frankly, that's not their style."

Stallings, who was hired by Western's board just before the government takeover--complete with a compensation package estimated at $1.2 million over two years, not counting stock options--remains gung ho about honoring the Hall of Fame commitment. But Scalzi is tightlipped, saying only that meetings are taking place between his agency and the USOC. Given the enormous size of the agency's workload, and the fact that Scalzi still isn't done hiring his staff, the RTC will be hard-pressed to make a quick decision.

Tutt insists the USOC is committed to staying in the area even if the Banning-Lewis site falls through; but a Colorado Springs official who asked for anonymity says that the project "could go somewhere else in the country. A lot of people would like to have it."

MEANWHILE, COLORADO SPRINGS watches and waits. Jack Smith, the assistant city attorney who has seen the Banning-Lewis project unfold, acknowledges that officials occasionally second-guess their decision to annex the land mass. It has created nothing but headaches--such as who pays for police patrols and public roads on Aries' empty fields. For now, Western pays. The thrift's checks go to the city, which forwards them to the county. But the agreement runs out in 1992. After that, the city gets stuck with the upkeep tab, currently running $350,000 per year.

Officials must also decide whether to de-annex the Colorado Centre. The city council hedged its bets last year when it agreed to swallow the development, inserting a proviso that the bond district must refinance its debt. Since that effort failed, the council can now throw the property back, further isolating the residents.

It is a bleak scenario. But if there is a common thread linking the players in Aries' dream project, it is a willingness to believe that, somehow, circumstances will conspire to rescue them. Faced with the prospect of sending cops out to patrol empty grasslands, Colorado Springs clings to the hope that the RTC will bail out the dud ranch. "The verdict is still out on whether it was a good deal or not," Smith says of the annexation.

However, taxpayers already have paid dearly for Frank Aries' fantasies. And questions will surely be raised about just how Western's $240 million worth of federally insured deposits were spent. Douglas says every penny was used either for land purchases or to pay consultants. Records indicate that $158 million went to direct land purchases; whether the other $82 million went entirely to pay consultants, subsidize improvements for the property and make interest payments is something the RTC undoubtedly will want to determine. Given the scope of the failure, says Mobil's Darnall, "You can be sure the government will take a hard look at all kinds of things that went on." Asked whether his agency is investigating for possible fraud, Scalzi says, "No comment."

Aries backers like Steve Schuck pooh-pooh any suggestion of impropriety. His friend simply got caught in the same whirlpool that dragged down developers across Colorado, says Schuck. "The market takes its victims, and it's not particularly discriminatory in how it does that. Frank was just one of those unfortunate and unintended victims."

Indeed, Aries has made one concession. He and his wife Judy put their $1.6 million Broadmoor mansion up for sale and plan to scale back their lifestyle. At last word, they were eyeing a $500,000 town home.

The gesture is unlikely to warm the hearts of desperate Colorado Centre homeowners or the investors who bought Banning-Lewis property before the crash. But on the whole, Colorado Springs residents seem to harbor little resentment toward the man whose wayward ambitions have come to such a dubious end.

"The common wisdom here," says Grubb & Ellis' Paul Turner, "is they try not to think about it.


Those Poor Driggs Boys

By Tom Fitzpatrick Wednesday, May 10 1989
Phoenix NewTimes News
Poor Gary Driggs, everyone keeps saying.
Such a shame. Gary and his two brothers--John and Douglas--have been booted out of their soft spots as chief moneychangers at Western Savings and Loan.
Sure, it's true that Western has dropped $300 million in the last two quarters.
But, after all, the Driggs family did start the firm. And Gary and his brothers have always been so civic-minded. Don't you remember how optimistic they've always been about the future of Phoenix?
"I wonder what they'll do now?" people ask. "It just doesn't seem fair." Well, let's see what Gary Driggs is doing.
For starters, Gary is walking away from Western Savings with $3 million in various forms of compensation.
His brothers, John and Douglas, are down for slightly lesser amounts. This is not a status they relish. In fact, John and Douglas are threatening to sue Western Savings unless their payoffs are increased.
A terse statement from the board of directors acknowledges the threat of litigation. It promises to defend against it "vigorously." It adds, however, that if the Driggs boys prevail, John Driggs will get an additional $662,831 and Douglas Driggs will get $848,577.
Western's stockholders may have succeeded in ridding themselves of the Driggs boys. But the total cost could be close to $10 million.
And they are being replaced at the top by Robert Stallings, 39, a Texas import, who has been given one sweetheart of a deal.
John Dillinger came to a very bad end without taking as much money from banks as Stallings will get from Western Savings in the next two years. Stallings, of course, was hired at the orders of the Federal Savings and Loan Insurance Company which is now supervising Western.
His salary for the first year will be $350,000 plus a signing bonus of $350,000. In his second year, Stallings' salary will increase to $375,000. In addition, he will get bonuses of $100,000 at the completion of each of his first two years on the job.
So Stallings will get a total of $1.2 million for two years.
But there's more. Stallings was given a $604,800 mortgage loan and an option to buy 343,200 shares of stock at $1.12. That means that Stallings can wait to see if the stock bounces back before buying it at a profit.
It goes without saying that Stallings will also receive all the usual executive perks such as a limousine, club memberships and relocation benefits. You have to wonder if Western Savings' stockholders--many of whom have seen their savings wiped out by the Driggs boys--will think Stallings is worth all that money. For that kind of compensation he should be playing starting forward for the Phoenix Suns.
The fall of Western Savings is a story of good ole boy arrogance and an overconfidence bordering on stupidity.
When Gary Driggs took over Western Savings in 1973, he was 38. He had been to all the right schools, both Stanford and Indiana.
Western's stock was selling at just under $40 a share. He was taking over a successful family business. He didn't know what it is to lose.
Right now, you can buy all you want of Western Savings stock at just about fifty cents a share.
The Pulliam newspapers have always had a love affair with the Driggs brothers.
To them, Gary was a "visionary." John was a former mayor of Phoenix. Chuck Walheim, former publisher of the Mesa Tribune, calls Gary Driggs "one of the most brilliant men I've ever met." What they avoided mentioning was that the Driggs brothers were also fairly shrewd con men. Gary, particularly, was a man who loved dancing in the spotlight.
But the warning signs were there. However, they always came from the outside.
The New York Times expressed doubt over Western's moves and warned that Phoenix was lucky because of the population boom here.
That warning was grandly dismissed.
Forbes magazine referred to Western Savings' weird practices as "Gary Driggs' financial magic show." Forbes pointed out that his operation was "a classic case of how reported profits can misrepresent economic reality." Barron's employed literary terms of derision which the Phoenix press considered too unflattering to repeat.
Barron's referred to Western's Evel Knievel lending and investing practices and Alice in Wonderland accounting.
Western has 2,000 loan delinquencies and foreclosures. There is $581 million tied up in raw land and other direct real estate investments. And there were these remarkable investments:
* $9 million went into Thousand Trails Inc., a campgrounds development company.
* $26 million went into Del Webb casinos in Atlantic City, Las Vegas, and Reno.
* $100 million went into a land deal with Nu-West Development for raw land in California and Arizona.
* They financed the building of the Ramada Renaissance Hotel in Mesa and had to take it over because the developers couldn't meet the payments.
Gary Driggs had lobbied Congress vigorously over the years to gain permission to take on just this type of investment.
"This is an attempt to bring us out of the Dark Ages," he said grandly.
Whenever he was warned off still another risky investment, he'd reply: "Forgiveness is easier to obtain than permission." But perhaps nothing exemplifies Gary Driggs' style like the building of the Western Savings Corporate Center just north of the Wrigley Mansion on 24th Street.
The $14 million edifice opened in November 1987 at a gala party to which all the usual suspects showed up. There was Burt Kruglick, the Republican party chief; Dino DeConcini, the brains and power behind Arizona's senior senator; Jim Simmons from the town's biggest bank; and Pat Murphy, the eminent publisher and bon vivant.
The building is a triumph in bad taste.
There is a 28-ton copper roof over marble floors quarried in Turkey and then polished in Italy.
There is a two-story atrium with 42-foot-high skylights and 7,700 subtropical plants packed into an array of planters.
If the company were still owned by the Driggs brothers, this kind of excess could be winked at. The risk would have been their own.
But 75 percent of Western Savings stock is now owned by the general public. It is these stockholders who have lost their money.
It remains to be seen how they will react on May 23 when the annual stockholders' meeting is held at the Driggs mausoleum.
Many will be holding in their hands the fifteen-page notice and proxy statement published by the directors of Western Savings.
If they have read it closely, these figures will stand out in their memories.
When Gary Driggs stepped down as president and chief executive officer, he was paid the following sums:
* Salary $300,851
* Deferred income $724,610
* Profit sharing $4,853
* Supplemental retirement $1,987,497
* Salary continuation $12,000 per °year for ten years
* Consulting pay $20,000 per month
* Board of directors salary $70,000
Gary Driggs did not go gently into that good night.
Henry David Thoreau, who understood such things, once wrote: "The ways by which you get money, almost without exception, lead downward." The fall of Western Savings is a story of good ole boy arrogance.
Gary Driggs was a man who loved dancing in the spotlight.

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