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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For the first time, many people had to admit that Janes might not be the person they thought they knew. Suddenly he seemed to have assumed two irreconcilable identities. His supporters still idolized him and spoke about him in reverential terms.” Mr. Janes is a wonderful man who’s being used as a scapegoat,” one says. “He is truly suffering.” But others believed Janes was at the heart of the bank’s troubles. “We were living with a rascal all these years, and we didn’t know it," says Hazel Witzel. Janes’s expertise at chess lent an air of cunning to his actions. “You take a person who’s a chess player,” one depositor whispered, looking over his shoulder. “They specialize in moves, whether they’re playing on a board or with people. It was one big chess game to him."
As the former bank customers split into opposing camps, a wall arose, dividing a community that had long been cohesive. Lifelong friends found themselves arguing bitterly. Suspicion and anger crept into every conversation. People spent their time phoning one another and embellishing the latest theories.
The anti-Janes faction suspected that Janes’s defenders had been warned in advance of the bank’s demise and had taken their money out just in time. Whether that is true may never be known, but the rumor fueled animosity. One woman who was pro-Janes heard that her cousin was spreading such a story about her. “I was ready to tear her from limb to limb,” the woman recalls. The cousins quarreled; there were angry denials, then a strained reconciliation.
The pro-Janes element asserted that the anti-Janes group was vicious and out for blood. “To me, it all comes down to greed,” one Janes supporter says. “I personally know a number of these people to be vindictive. They just want somebody to suffer like they have."
Turkeys for Christmas
Perhaps at any other time a woman like Judith Kearns would have been laughed off the streets of a little town like Leroy. She showed up in late August, only days after the lawsuit against Bailey and Tankersley had been filed. She introduced herself as someone who had been a childhood playmate of the Rockerfellers. She had flown out from Southern California, she said, to help people out of their straits. She said she had $8 million with which she planned to buy the bank and restore the depositors savings. Blinded by desperation, the people of Leroy listened to her story. The more they wanted to believe her, the better she sounded.
In early September Kearns called a meeting of the depositors at the community hall in the nearby town of Tours. Before a crowd of more than three hundred, she read an impressive proposal to recapitalize the bank and privately insure each account through Lloyds of London.
It was as though an angel of mercy had descended on Leroy, an angel with quirks. On certain subjects, Kearns maintained an odd secrecy, particularly on the source of her money. But if her proposal sounded too good to be true, it was also too good to ignore. Enticed by her rosy promises, the depositors set aside their reservations and mistrust. They set aside their differences over Janes, and gradually they let down their defenses. Kearns began visiting them in their homes and meeting their families. They cooked meals for her and told her their troubles. One woman gave Kearns the key to her house. “She was so unpretentious, you know,” says another. “Her explanation was that she wanted to put her money to good use to help poor people.”
In September Kearns filed an application with the state banking department to recapitalize the bank. She later met with Commissioner Littlefield in Austin to discuss the offer. Littlefield was skeptical from the start. It troubled him that Kearns refused to reveal fundamental information about her background. Even more disturbing was that she seemed to have no sound financial reason to want the bank. As one analyst in the banking department puts it, “It just didn’t make economic sense that someone would come in and throw eight million dollars into a hole that deep.”
Littlefield was impatient to start selling off the bank’s assets and collecting on the outstanding loans. Kearns tried to persuade him to hold off until she could wire the money to Waco. District court judge Bill Logue signed a restraining order delaying the liquidation so Kearns would have more time. Repeatedly she said she was on the verge of getting the money. But there were always technical difficulties, followed by elaborate, inventive excuses. On October 1 a group of depositors spent four and a half hours in a conference room at Waco’s MBank, waiting for the money to arrive from Kearns’s account is Lausanne, Switzerland. Kearns was in Dallas at the time, telling people in Leroy that she was making arrangements by phone to wire the money through a California bank. By closing time, the money had not arrived. The depositors went home downcast. Kearns called the next day to say that the transmission had been interrupted by an earthquake.
Frantic, the people of Leroy were not about to abandon hope. They had linked their fate to Judith Kearns, and they were going to stick with her no matter how far-fetched her stories. But they weren’t the only ones willing to give her the benefit of the doubt. Four times Judge Logue extended the restraining order to give Kearns a chance to produce the money. Each time hundreds of depositors would cram into the courtroom and pray —and Kearns would let them down. By late October, the depositors were panicking. If no money appeared by November 3, Logue would allow the restraining order to expire, and the bank could be liquidated.
On November 2 Kearns was once again in Dallas, telling people she was making arrangements. She called her friends in Leroy to report that everything was ready — all she lacked was $15,000 “to close the deal.” She turned to Jay and Nita Jones, her strongest supporters. The Joneses, in turn, went to the man they trusted the most, Bill Janes. Talking the matter over, they agreed that even though Kearns had disappointed them so far, they had not actually caught her in a lie. What if she was telling the truth and they ignored her? Could they afford to turn their back on Leroy’s only hope? They decided to loan Kearns the money.
Janes put up $10,000, and the Joneses gave her $5,000. The funds were transferred to Janes’s account at MBank in Waco, and from there they were wired to the New York company that was to lend Kearns the capital for the bank. They were assured that the money would be returned the following day.
A hearing was set for the morning of November 3. A crowd of depositors arrived early and pressed into the courtroom to wait and pray. As the minutes ticked by, there was no word from Kearns. The deadline came and went, but still no word from Kearns. Forty more minutes went by as everyone watched the clock. Still no word. Finally Logue let the restating order expire. The Leroy Bank would not open again.
That night Kearns called a depositor to apologize. Her connections had fallen through, she said, and she was sitting in a hotel room, thinking about the people of Leroy and crying.
After three months, the charade had come to an end. The people of Leroy saw that Kearns was not a savior, after all. But she didn’t simply vanish. Back in California, she continued to call her Leroy acquaintances from time to time to rattle off her latest scheme to revive the bank. In late December she called to say that she was sending turkeys to all of the Leroy Bank depositors for Christmas. They never arrived.
On the Auction Block
Judith Kearns left a bitter trail in Leroy. Those who had trusted here were now utterly disillusioned. More and more of the bank’s depositors were ready to believe that they had lost their money not because of chance or error but because someone had cheated them out of it. Three days after the liquidation order was signed, Janes’s name was added to the lawsuit (his wife’s was added in August 1988). About 40 depositors who backed Janes dropped out, leaving 376 plaintiffs.
On a sunny day in October 1988 the contents of the Leroy Bank went on the auction block. Everything from file cabinets to pencil sharpeners, even the rickety green couch, was auctioned off and carried away. From a storeroom at the back of the bank came carton after carton of unused giveaways — plastic pitchers, change purses, sink stoppers, egg separators, spatulas — all imprinted with the words “Another service of the Leroy Bank.”
All of the Leroy Bank’s loans were in the possession of NCNB, which had taken over FirstRepublicBank. The loan portfolio legally belonged to NCNB because that institution held a secured lien against the Leroy Bank for $1 million. But insiders who examined the portfolio said that it was a disaster: Records were poorly kept, if at all. Some loans were made on insufficient collateral; others were not pursued when they came due. Millions of dollars had flowed out of the bank and would never come back.
NCNB representatives are still trying to collect on the loans, value at $3.5 million. State banking officials privately say they will be lucky to get $600,000. Depositors, meanwhile, have filed claims against the bank worth more than $3.5 million.
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