Don R. Dixon had all the trappings of success: a California beach house, trips to European spas, $5 million in art, Rolls Royces and $110 perfume bottles for his wife.

He traveled on corporate jets, relaxed on a corporate yacht, entertained politicians. Dixon's salary and benefits ran in the millions.Federal officials say that the "indulgent and opulent lifestyle," right down to the perfume, was financed by the savings bank Dixon owned, Vernon Savings and Loan.

Ultimately, however, the U.S. government paid. Vernon S&L was declared hopelessly insolvent and was closed. It cost the Federal Savings and Loan Insurance Corp. more than $1.3 billion to pay off Vernon's depositors - making it one of the biggest bailouts in U.S. history and about the same size as the Chrysler Corp. rescue.

Dixon faces a civil suit accusing him of falsifying financial statements and "systematic looting and wasting the assets" of Vernon, which was named for a small Texas town. He's moved to California, filed for personal bankruptcy protection, denied the accusations in court but declined to answer questions before regulators.

Two former Vernon vice presidents and a former president have pleaded guilty to various bank fraud charges and agreed to cooperate with prosecutors. One has even admitted hiring prostitutes for a board meeting. Dixon, authorities say, is a top target of the most extensive white-collar criminal investigation in Justice Department history.

And Dixon is something more: an example of the roots of the U.S. savings and loan crisis.

While the S&L catastrophe has been triggered by the downfall of the Southwest economy, it has been exaggerated by the high-flying antics of "entrepreneurs" in Texas, California and other states who, either through fraud, mismanagement or bad decisions, created billion-dollar messes.

"For some few unscrupulous individuals, it was simply an accepted way of doing business," said Marvin Collins, the U.S. attorney for north Texas. "That small percentage had a tremendous impact."

About one-sixth of the nation's 3,000 S&Ls were insolvent at the end of 1987. They stretched from Alaska to Florida; Texas had 128. Most were well-managed institutions that fell on hard times, regulators say. But as Congress tries to save the industry credited with financing the American dream of home ownership, it has become increasingly clear that the S&L story is not simply one of an economic downturn.

Without the fraud, "you don't have the problem you have today," said M. Danny Wall, chairman of the Federal Home Loan Bank Board and the nation's chief S&L regulator. "There are others besides Vernon that will prove to have been fraudulent."

And there's more. Regulators themselves have been called on the carpet by congressional committees and others for failing to watch over the industry.

The federal regulatory staff in California fell from 200 to 40 in the early 1980s. The Southwest office lost most of its staff when it moved from Little Rock, Ark., to Dallas. Some Texas S&Ls didn't have audits for three years. Questions were raised about Vernon in 1983, but nothing was done because of insufficient staff, regulators say.

Texas regulators were also stranded when the state Legislature redirected fees from savings and loans to help balance the general budget, a governor's task force found.

"There was no one looking after the shop," said banking analyst Frank Anderson of D. Latin & Co. "The people in Washington, before Danny Wall came (in 1987), had no clue."

S&L executives, including Tom Wageman, chairman of Sunbelt Savings in Dallas, blame a series of rules changes for causing havoc and opening the dirty dealings door.

Even the cleanup has been troubled.

-For months after the problems were discovered, losses for the industry continued at the rate of $1 million an hour because the FSLIC didn't have enough money to close down the insolvent thrifts.

-Healthy institutions must pay special assessments to cover the losses - a policy one leading S&L banker has dubbed "vampire economics."

-Wall's "Southwest Plan" was scheduled to sell or close at least two insolvent S&Ls a week, but in its first six months handled only a handful.

-Some in Congress have complained the bank board has been handing out the few billions it does have without proper debate.

"It is incomprehensible to me that a sense of crisis has yet to develop around this issue," said Rep. Charles Schumer, D-N.Y., a House Banking Committee member.

And not everyone is convinced the questionable practices have ended.

"I originally predicted that the bulk of this ctivity was historical," said Collins, the federal prosecutor. "Unfortunately, I think there is still some of it going on."

Created after the Great Depression, the savings and loan industry provided a simple service: locals deposited their paychecks in government-insured accounts and the bank lent it back in home mortgages.

Vernon S&L was a small-town thrift doing that small-town business 10 miles below the Oklahoma border. There was hardly a safer, more plain-vanilla business.

In the late 1970s, high interest rates sapped the profitability out of S&Ls, though. Congress deregulated the industry, loosening the restraints on what rates S&Ls could pay depositors and opening up new money-making services.

Dixon bought Vernon in 1982, moved its headquarters to Dallas and offered high rates that attracted depositors from across the country. The deposits were guaranteed by the FSLIC up to $100,000, and millions of dollars flew in. Vernon grew a staggering 1600 percent in less than four years - even though S&Ls are prohibited from growing more than 25 percent per year.

With all those deposits, Vernon went on a lending binge. New rules allowed S&Ls into commercial developments. The changes also allowed loans on projects with little capital behind them and no down payments. Qualifying for loans was a snap if you knew the right people and were willing to pay Vernon's heftier fees.

"The officers of Vernon conducted the real estate lending function of Vernon in a way calculated to create as much loan-fee income as possible, without particular regard to use of sound lending practices," former Vernon chief lending officer Jim Wright said in an affidavit.

New rules also allowed Vernon and other S&Ls to become a partner in deals by making direct investments - a risky venture.

"Direct investment is heads, they win; tails, the FSLIC loses," said FHLBB member Roger Martin.

The FSLIC, of course, usually lost.

At the high-flying S&Ls, there were tales of developers lining up in bank lobbies to "do deals." Ed McBirney, then chairman of Sunbelt Savings, which was known as "Gun-belt Savings," conducted business at a local restaurant.

Western Savings Association grew 5700 percent under its chairman, Jarrett Woods, who, federal regulators say, took $3 million in salary and bonuses while his S&L plunged into the red.

As the frenzied lending continued and depositors' interest earnings had to be paid, bank executives raised the interest rates offered even higher so more money would come in, and dove into even riskier ventures hoping for a big payoff.

The cycle has been likened to a pyramid scheme, backed by the insurance of the government.

"Many of these high fliers used their S&Ls as private piggy banks," the General Accounting Office reported.

Officials also charge that S&L executives fudged their required fil-ings with regulators to make thrifts look healthier. At the end of 1986, Vernon reported a positive net worth of $17 million, but regulators say it actually was negative $350 million. Ninety-six percent of its loans were overdue.

The FHLBB estimates the cost of cleaning up Texas is $15 billion. The national total grows about $1 billion a month, according to government projections. Paying off depositors will cost twice what the Reagan administration has spent on "Star Wars," officials say, at least $40 billion and perhaps $100 billion.

An FBI task force, which now occupies an entire floor of a federal building here, has subpoenaed rec-ords from 290 individuals. So far, 17 S&L officials have been charged; Collins expects more indictments this fall.

"When you commit armed robbery at a bank, alarms go off, the police come and sometimes there's a chase," Collins said.

"When you commit bank fraud, nothing happens. There's not much of immediate consequence."