The official ruling was mechanical failure of the lead's elevator. The more likely explaination was pilot error - topping out on the loop too low to recover. From this source: "January 18, 1982, saw the catastrophic "Diamond Crash" occur during a practice over Range 65, now referred to as "The Gathering of Eagles Range". The team was conducting a line abreast loop maneuver, when a malfunction of the commander/leader's aircraft proved to be fatal for the four pilots of the Diamond formation. Those involved were: Maj. Norm Lowry, commander/leader; Capt. Willie Mays, left wing; Capt. Pete Peterson, right wing; and Capt. Mark Melncon, slot. Due to this catastrophe and the transition to a new aircraft, the Thunderbirds did not perform any aerial demonstrations during the 1982 demonstration season. The team began the transition to the General Dynamics F-16A Fighting Falcon in August 1982. Not until April 2, 1983, however, was the first performance flown in the F-16s, more than 18 months since the last show. The conversion to the F-16 involved removing the radar and an internally-mounted 20mm cannon, and installing a smoke-generating system. The Thunderbirds F-16s can be turned into gully combat-capable places within 72 hours."
Space/Science » in reply to Re: The Thunderbirds flew T-38s for many years
They were flying T-38s for the formation crash in 1982