Those Poor Driggs Boys

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.

KEEP PHOENIX NEW TIMES FREE... Since we started Phoenix New Times, it has been defined as the free, independent voice of Phoenix, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Tom Fitzpatrick