7 Indicted in Texas Savings Fraud
7 Indicted in Texas Savings Fraud
By PETER H. FRANK, New York Times, 10/8/1987, original
Seven Texas businessmen were indicted by a Federal grand jury here today on charges of participating in a scheme that gained more than $100 million from five savings and loan associations through the use of fraudulent real estate loans.
Four of the thrift institutions have been closed by Federal regulators.
If convicted an all charges in the 88-count indictment, the men face prison sentences of 38 to 356 years and fines of $62,000 to $314,000. The indictment also asks that five of the defendants be forced to forfeit $12 million to $40 million in cash, which they are accused of having acquired illegally.
Today's indictments, resulting from a four-year investigation, are considered a precursor of what is expected to come out of a widespread similar inquiry, begun in August by the Federal Bureau of Investigation, into the Texas savings and loan industry. The F.B.I. is looking into more than 20 savings and loan associations that are believed to have been similarly damaged by fraudulent transactions and willful mismanagement.
One of the institutions involved in today's indictments was the Empire Savings and Loan Association of Mesquite, Tex., which was closed by Federal regulators on March 14, 1984.
The four other institutions were the Bell Savings Association of Belton, Tex., the First Federal Savings and Loan Association of Lancaster, Tex., the First Savings and Loan Association of Burkburnett, Tex., and the First State Building and Loan Association of Mountain Home, Ark., which is the only one still operating.
Empire's closing by Federal regulators represented the nation's largest such failure, costing the Federal Savings and Loan Insurance Corporation more than $300 million.
"This is not the end of the investigation," said Bobby R. Gillham, the special agent in charge of the F.B.I. inquiry. "There could be additional charges brought at a later time."
Commonly known as the I-30 condo case, for the site of a group of failed condominium developments in eastern Dallas County, it was earlier described by Edwin Gray, then chairman of the Federal Home Loan Bank Board, as "one of the most reckless and fraudulent land investment schemes this agency has ever seen."
According to today's indictment, the seven men were instrumental in causing the savings and loan units' failure, which resulted from soured loans that had been secured through an elaborate array of artificially inflated property values, false financial documents, bribes and kickbacks.
Those indicted were Spencer H. Blain Jr., former chairman and chief executive of Empire Savings; Paul A. Jensen, former chairman of Lancaster First Federal and an agent of Bell Savings; Paul D. Tannehill and Arthur Fromann, local real estate appraisers, and Danny Faulkner, James L. Toler and Kenneth E. Cansler, local real estate developers.
William M. Ravkind, the lawyer for Mr. Blain, said tonight that his client would plead not guilty.
The four-year inquiry, which has already resulted in 92 convictions, was conducted through a joint task force of the F.B.I., the Texas Department of Public Safety, the United States Attorney's office and the criminal fraud section of the Justice Department.