The Day Leroy Died
When a small town’s uninsured bank collapsed, all that remained were suspicion, ruined dreams, and despair.
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On May 20, 1987, Janes sent a letter to each of his customers notifying them that he had sold the Leroy Bank. The sale was, he said, “in the best interest of the bank.” To those who asked him about it, Janes said that he was getting on in years and wanted to retire. His only son, who was working for an extermination company in Waco, would never follow in his footsteps. A responsible buyer had made an excellent offer, and Janes had decided the time was right. Not long after the letter went out, Janes held a reception in the church annex, where he introduced the new owner, Ronald Bailey, who was solid-looking, quiet, and serious. Janes described him as a business economist from Berkeley, California, someone who understood finance. Even though Janes had sold the bank, he assured everyone that he would stay on for one month.
Indeed, few things seemed to change. The imposing portrait of D. T. James still hung prominently on the rear wall of the Leroy bank. In the tiny lobby the same green vinyl couch sat next to the same potted pine. Behind the teller cages were the same women posting checks at the same unhurried pace. And Bill Janes was still at work, supremely confident, greeting customers as he sat next to Bailey behind the glass partition.
A couple of weeks after the Leroy Bank was sold, the Reverend Cecil Anderson stepped in to have a private word with Janes. Anderson was worried about his savings, set aside during a lifetime of farming, ranching, and weekend ministering at Southern Baptist church near Mount Calm.
Anderson, 77, had known Janes and his father for more than forty years, from their days at the Leroy Odd Fellows Lodge. Anderson had been reading in the newspapers about the closing of the Chilton Private Bank, about twenty miles from Leroy. The bank in Chilton had recently changed owners, and the same week that the Leroy Bank was sold, the Chilton bank had been closed. To Anderson, similarities between the banks — both were private and both had been sold— were unsettling. Anderson told Janes he wanted to withdraw his savings. Aside from his social security checks, that was all the money he had. About half the money was in uninsured certificates of deposit, and he wanted to cash them in.
Anderson recalls that Janes informed him about the penalties associated with cashing in CDs before they mature and reassured Anderson that the money was in good hands. “He told me he was seventy years old, had been in the business quite a while, and wanted to get out and enjoy something else,” Anderson says. He decided to leave his money where it was, but he was wasn’t completely at ease.
Lenora Schutza also received the letter about the bank’s change in ownership. A widow in her seventies, Schutza lived west of Leroy on the farm that her grandfather, a German immigrant, had purchased. He had kept his money in the Leroy Bank and had done business with D. T. Janes, so there was little doubt in Schutza’s mind about the best place for her small savings. In 1978 her husband had cashed in an insurance policy and added the $14,000 to their savings account at the Leroy Bank, in order to take advantage of an extra 2 percent interest. After her husband’s death, Schutza made monthly trips to the bank to cash her government checks and pay her water and electric bills. She was nervous about her money but she trusted Janes. “I thought there wasn’t a better man than him,” she says.
Henry Young, another longtime customer, stopped by Janes’s house to inquire about his savings. A 79-year-old retired grocer from nearby Elm Mott, he had been banking with Janes more than twenty years. Young asked Janes why a man from California would be interested in a tiny bank in Texas. “He turned around and looked the other way,” says Young, “and finally he said, ‘Well, he just wanted a small bank.’ ” Like the others, Young did not withdraw his money.
A Scoundrel or a Saint?
During the first week of August, Leroy was abuzz with party preparations. There was to be an open house Saturday, August 8, in honor of Ronald Bailey and several longtime employees he had promoted. Invitations had been sent, a caterer was preparing food, and Bailey’s wife had flown in from California.
In Austin that week, state banking commissioner Kenneth Littlefield decided to take a look at the Leroy Bank. State banking examiners had become interested in the Leroy Bank after the closing of the Chilton Private Bank. Although the state did not explicitly have the authority to examine private banks — a provision granting it went into effect on August 31, 1987 — Littlefield sent a team of examiners to Leroy on Monday August 3. What they found was a mess. The bank’s records were in total disarray. Not only were the books ill-kept, they also did not balance. Liabilities exceeded assets by more than $1 million, meaning that the bank was clearly insolvent. Deposits totaled about $5 million. The bank’s loan portfolio was $3.5 million, but many of the loans looked questionable. The bank owed about $1 million to FirstRepublicBank Waco, the institution that cleared all of the Leroy Bank’s checks. But there was only $1000,000 in CDs and $20,000 in cash on hand.
On Thursday night Littlefield received even worse news. An official at the Federal Reserve Bank of Dallas called to say that the Leroy Bank didn’t have enough money to cover the checks written by its customers. That meant the bank was out of cash. There would be no party in Leroy. The notice went up on the door the following day, and the bank was closed.
On that hot Friday afternoon, the Reverend Anderson lost every cent of his savings, nearly $37,000. Lenora Schutza lost $24,030, and Henry Young lost $43,000. Of the 1,200 depositors at the Leroy Bank, more than half were over 65 years old. They had lived on savings-account interest and social security checks, which they had faithfully deposited the first of each month. When the Leroy Bank closed, a lot of those checks had just been deposited. Without them, many people had no money for medical and utility bills.
It was not simply the money that had vanished but what it represented — countless dreams of security and independence, plans for retirement, for travel, and for purchases large and small. One couple lost their burial fund. A twelve-year-old boy lost the money he had saved for a 4-H lamb.
As the magnitude of the loss sank in, a group of depositors formed an association to raise funds, collect food donations, and devise a strategy for recovering some of their money. They hired Bill Vannatta, a Waco attorney, and began to talk of law-suits and legal responsibility. Ronald Bailey was the obvious target. A couple of weeks after the bank closed, a small group of depositors held an emotional meeting with Bill Janes in the church annex. Some people were crying. Bill Janes, looking stiff and uncomfortable, stood up and made a short speech, the only time he commented in public on the bank’s failure. He said he would like to help put the bank back on its feet. To that end, he said, he was prepared to contribute $60,000.
No one said a word. Janes frowned, and then said he wanted to introduce Bill Tankersley, a retired electrician from California. Tankersley stood up and made a quiet announcement: He had just purchased the bank for one dollar from Ronald Bailey. Now people were utterly confused. Tankersley offered no explanation for why he had purchased the bank or what he intended to do with it.
Later, in depositions, Bailey would maintain that Tankersley had owned it all along and that Bailey had only been managing it. Tankersley would contend that the bank ran out of money because of a flood of withdrawals in the weeks after it was sold. In other words, the bank’s closing was all the fault of the depositors. To the people who just a few months before had resisted the urge to withdraw their money, that was the ultimate insult.
On August 27, a group of depositors filed suit in McLennan County district court against Bailey and Tankersley for breach of depository contract, fraud, and negligence. Still unresolved was the troublesome issue of what condition the bank had been in when Bill Janes sold it. Whenever anyone asked him about the bank, which wasn’t often, he insisted it was in solid shape at the time of the sale. But most of the time he said nothing.
A few days after the lawsuit was filed, Janes was driving down FM 308 when he approached his old friend Otis Richardson headed in the opposite direction. Janes flagged Richardson down and asked if he was involved in the lawsuit. Richardson said he was.
“I told him, ‘Mr. Janes, if you don’t have anything to hide, then you don’t have anything to worry about. But if you do, we’re coming after you,’ ” Richards says. Janes just turned around and walked away without saying a word.
As the weeks passed, Janes’s role in the bank’s failure became the focus of intense debate in every Leroy home. The question was whether his name should be added to the lawsuit. To the people who thought Janes was responsible for the bank’s troubles, his silence was interpreted as an admission of guilt. “If Bill Janes had ever come to me and said, ‘I’m sorry,’ don’t you know I would have forgiven him,” says depositor Hazel Witzel. “But he doesn’t even speak. He has been very unfriendly. Cold as he could be."
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