Texas Monthly Reporter
The red-hot rumor, blazing from mouth to mouth in Dallas recently, had longtime radio programming genius Gordon McLendon raising $2 million for a group of Dallas investors to buy WRR-AM, the city-owned, all-news station that’s up for sale. Not so, says son Bart McLendon, manager of McLendonowned KNUZ-FM in Dallas. “We would love to have the station but when Dad sold KLIF-AM there was a noncompetitive AM station clause in the contract.” Experienced media buyers in Dallas think the station, which showed improved ratings recently, will cost between $2 and $3 million, but it will come out of a non- McLendon pocket.
If in the near future you are in the middle of some natural disaster and the paramedic dropping out of the National Guard airplane to help you turns out to be female, don’t be surprised. The Texas Guard’s parachute jump school at Camp Mabry in Austin just graduated Private First Class Carrie A. Noble, the first woman outside the regular Army to complete military jump training. She was one of three women who entered the six-week course, which is required to become an airborne medic. Along with Noble, who is a housewife, Staff Sergeant Patricia S. Key, a registered nurse, and Specialist Fourth Class Terri L. Hayden, a model, signed up for the course. All are from Houston. Before taking the five required jumps from a plane, the women and their classmates were trained in landing procedures, handling the harness and maneuvering the chute, getting untangled from other chutes and trees, and—probably the worst—just getting out the doors of the plane. According to one of their instructors, “Women are fragile, it was hot, the training was rough, and they were going eight to twelve hours a day, but they did all right.” Key, who could not finish because of a neck sprain, and Hayden, who suffered heat exhaustion, say they plan to sign up for the next school in October. Noble, whose husband is a full-time Guard recruiter, has also attended the Guard’s military police school in addition to her medical training. In case you’re wondering, the three “Guardsmen” are referred to as “women soldiers.”
It wasn’t exactly a royal wedding, but a good deal of the Texas country music aristocracy was there. Lana Nelson, 22-year-old daughter of Willie Nelson, married George Fowler, 26, in mid-June on the patio of the Feed-Lot, an Austin-area restaurant overlooking a cedar-covered portion of the Hill Country. Since the father of the bride was delayed by bad weather after a gig in Houston, it was decided to hold the reception before the wedding, with entertainment provided by the Geezinslaw Brothers and Other Normal People. Arriving on a chartered plane, Nelson hurried out to give his daughter away and sing “Hands on the Wheel,” accompanied by his sister and band member Bobbie. Among the 300 or so people attending were Jerry Jeff Walker and Lana’s two young sons from a previous marriage, who served as ring bearers. The couple is now living at the Pedernales Country Club on Lake Travis and managing it for its new owner—Willie Nelson.
What, you ask, is a calculator doing in the PEOPLE section? It may not be human, but it’s certainly smarter than many of the rest of us—and it talks, too. The instrument is being offered by—who else?—Neiman-Marcus, which compares the machine with Hal, the talking computer who in his last scene in 2001, A Space Odyssey was singing “Daisy.” The voice is a series of digital signals that simulate a man’s voice. Speech Plus (the name given to it by its maker Telesensory Systems, Inc.) certifies each entry and announces the results. For example, if you want to add twelve and twelve you tell the calculator and he responds, “One two plus one two equals two four point oh oh.” Originally designed as a calculating tool for the blind, Speech Plus can be used by children with learning difficulties and by groups, allowing several people to hear complicated calculations being made. In addition, a per on can make calculation without looking up to check each entry. The calculator adds, subtracts, multiplies, divides, and does square roots and other complex calculations. If you decide you have to have one, they are available at both Dallas store and the Houston Neiman’s for only $395. Speechless?
The Gospel According to Don
The man who claims that divine intervention brought him victory in the Democratic primary in May said he prayed to God again in June to swing twelve more people in his favor, but this time they didn’t get the Word. Jurors in the first of sixteen lawsuits pending against unopposed Texas Supreme Court candidate Donald B. Yarbrough listened to Yarbrough himself confess to huge profit and strange business practice and decided that, here on earth, at least, he was not free of sin. The district court jury found that he engaged in acts which the trial judge ruled to be fraudulent and that he had committed gross negligence in the practice of law; and, while the monetary penance they imposed on him (about $100,000) fell far short of what the plaintiff asked for, their judgment clearly imperils his political future.
Once the verdict came in, State Bar officials moved into high gear to tart possible disbarment proceedings against Yarbrough, expected to begin in early August. One State Bar Source privately said disciplinary proceedings were “inevitable.” The problem is that the Texas Constitution is unclear about whether a Supreme Court justice has to be a practicing lawyer at the time of his election. Disbarment alone may not keep Yarbrough from assuming his seat on the bench in January, so the State Bar is investigating other options, such as suing secretary of State Mark White, the state’s top election official, to keep Yarbrough’s name off the ballot if his law license is revoked.
The entire legal community is reluctant to discuss the Yarbrough situation, partly because of ethical consideration in a case where no action has yet been taken, but also because they are acutely embarrassed that he defeated their candidate, San Antonio Civil Appeals Judge Charles Barrow—and also, of course, because lawyers are notoriously closed-mouthed about the working of their profession. Nevertheless, testimony at the trial produced a wealth of insight into Yarbrough’s dealings in legal and financial circles during the last six years, and statements outside the courtroom have provided a few revelations about how Yarbrough’s mind works. Yarbrough has claimed that the law firm that brought the case is “out to ruin” him because Joe Reynolds, the head of the firm, once lost a business deal to Yarbrough; the press is out to get him, presumably for the sake of mere sensationalism; and attorneys are after him for political reasons. Yarbrough also admitted he taped all his own calls and office conferences without the other person’s knowledge—not, however, an illegal act—including a conversation with his wife last January when they discussed his running for the Railroad Commission or the Supreme Court. (“God likes to perform miracles,” Yarbrough noted in his tape log.)
The trial was attended by members of Houston’s First Baptist Church, as well as by representatives of state agencies investigating him—including not only the State Bar but the State Securities Board as well. They heard the details of Yarbrough’s financial balancing act—how one loan paid off another which paid off another, and how he bought a bank with money he allegedly borrowed from it. All this began almost a soon as Yarbrough arrived in Texas in 1970.
At that time, Yarbrough left his job as general counsel for Campus Crusade for Christ in California and came to work in Houston as an attorney for lobbyist Jimmy Day and Galveston wheeler-dealer Shearn Moody, Jr. Before he could even set up housekeeping, however, the moving company slapped him with a suit for allegedly failing to pay the cost of transporting his furniture. A year later, FBI agents questioned him when IBM stock certificates he was trying to negotiate for a Houston dentist turned out to be stolen. In 1973, an old woman dying of cancer complained to a state district judge and the State Bar grievance committee about Yarbrough reportedly persuading her into signing a “power of attorney” form. The problem arose because she said he brought a suit in her name without her knowledge or consent. The trial judge called the woman at the hospital and, confirming her story, abruptly dismissed the case that Yarbrough had filed.
By 1974, complaints against him were growing in number. Two people sued Yarbrough, then director of a Victoria bank, for allegedly foreclosing their bank notes early, taking over whatever material possessions they had for security, and then attempting to sell the property for his own personal profit. (They both won court orders stopping the sales and got back their goods.) Three more people filed suit against him for allegedly defrauding them in bank stock ale and accused him of using his Christianity to win their trust. Mixed up in those suits were Yarbrough’s bizarre dealings in Mexican gold pesos ; he would reportedly peddle the coin to his clients, two of whom had their stashes mysteriously burglarized a few month later. Finally, a Pentecostal steward from Missouri went to federal court with his complaint; he claims he wired $30,030 to Yarbrough for some pesos but maintains he received neither coins nor cash in return. Many of these cases are still pending.
At the June trial, some of Yarbrough’s unorthodox business operations surfaced. He confessed that he presented false information on loan agreements, left sales contracts undated so that he could get better tax breaks by including the sales profits in the next taxable year, and “mistakenly” overcharged client on interest rates for promissory notes. Concerning one company, Gold and Silver, Ltd., Yarbrough claimed it at one time as his “wholly owned corporation.” At the June trial, however, he testified that he had only organized the corporation as a favor for a man named Bill Rothkopf, now wanted by the Houston police.
Stories about Yarbrough go on and on. One prominent Houston attorney recalls chasing him down two flights of stairs a couple of years ago at the county courthouse in a futile attempt to force him to appear in court; and a former state district judge says that Yarbrough kept jumping up and down objecting to witnesses’ testimony at a hearing in which he was the defendant, not the attorney in the case. A former law associate says that when Yarbrough ran for state treasurer in 1974, he hinted that “the law firm would make a lot of money” if he was elected (he lost). And attorney Charles Moore, who tried the lawsuit against Yarbrough last June, says that Yarbrough intimated that the Lord would loose his wrath upon Moore if he continued to pursue the case. “If he does get on the Supreme Court, the only blessing is that there will be eight others to watch him,” said the attorney who chased Yarbrough downstairs. “Who knows what he would do if left to his own.”
Together We Could Have
Despite all the calls for unity and Together We Can banners, the 1338 delegates to the June Republican State Convention in Fort Worth left no doubt where their priorities lay. More important than ending the best mind and most experienced party members to the National Convention in Kansas City was making sure every delegate was 100 per cent behind Ronnie Reagan. And they all are.
The moment of revelation came when West Texas rancher-historian J. Evetts Haley was elected one of the four at-large delegates instead of State Representative Fred Agnich, an ex-national committeeman, ex-county chairman, and the cortex and medulla of Dallas County Republicanism. Said one Dallas County delegate, staring limply at the podium in the Tarrant County Convention Center, “My God, just when we need to send a man like Agnich to the National Convention, someone who knows everybody, who could roam the floor, buttonholing uncommitted delegates, we do this.We are McGovernizing ourselves.” As the delegate’s blood slowly boiled, he named off all the Republican heavies who had been hut out of convention participation because of their neutrality or earlier support for Texas GOP primary loser, Gerald Ford. “There’s John Tower, Ray Hutchison, Pat and Bill Archer, John Connally, and Fred Agnich. All that expertise wasted. We Reaganites are doing exactly what McGovern’s kamikaze leaders did in 1972 when they shut out labor leaders, party regulars, and Richard Daley.” Who will be running the show in Kansas City for the Texas delegation? “Jesus, I guess Ernie Angelo, our new national committeeman.” Angelo is the GOP mayor of Midland.
What the man said made sense. For instance, the other three at-large delegates elected to join the already chosen 96 committed Reaganites include newly elected Congressman Ron Paul, a Lake Jackson gynecologist; Houston oilman Michael Halbouty, a onetime Ford supporter who turned Reagan fund raiser after Ford signed the 1975 energy bill; and Fran Chiles of Fort Worth. While enthusiastic, they are not exactly the Larry O’Brien of the Texas Republican party. Party pro Agnich lost twice. First, knowing he had no chance to win, he declined to run for reelection as national committeeman. Then he decided to let John Leedom, Dallas city councilman and a Reagan delegate, nominate him for one of the at-large spots. When he saw a loss looming, Agnich withdrew his name.
One plus was the election of Fort Worth State Senator Betty Andujar as GOP national committeewoman, replacing the disfavored Pat Archer, wife of Houston Congressman Bill Archer. Both Archers had kept their arrows in their collective quiver and remained neutral in the emotional May primary, supporting neither Ford nor Reagan. Andujar defeated Barbara Howell of Fort Worth, wife of John Howell, who was chosen one of the at-large alternates. Ms. Howell carried on a spirited campaign: busing delegates for brunch at her swankienda; covering hotel walls with expensive color posters; and gaining support of Harris County GOP PoohBah, Nancy Palm. But she made a leaden speech that echoed Reagan’s platform—Panama Canal, welfare reform, on and on . . . Andujar carried the day with a short, humorous, spontaneous speech, winning twenty congressional districts to Howell’s four (all in Harris County).
The real winner to emerge from the convention is state GOP chairman Ray Hutchison. After turning over presiding duties to permanent chairman Ray Barnhart, Harris County GOP chairman, Hutchison kept a low profile, sympathizing with Ford losers and congratulating Reaganites. Hutchison will be hard to deny the Republican gubernatorial nomination if he wants it in 1978.
A common practice in Texas banking circles is coming under increasing fire from federal investigators. Large banks have been lending money on highly favorable terms to borrowers who use the fund to purchase small banks. As a quid pro quo, the borrowers often agree to make the smaller bank a captive customer of the large bank, sometimes even to the point of keeping huge non-interest-bearing accounts with the larger bank. The latest investigation came to naught, however, when a federal grand jury in Houston, after 31 months of study, apparently decided to take no action concerning a stock and loan agreement involving Texas Commerce Bank and the former South Texas Bank, now South Loop National Bank. Although there has been no suggestion of any direct benefit flowing to Texas Commerce Bank, what concerned federal investigators was the fact that some of the proceeds of the loan from the big bank (TCB) were destined for the hands of TCB officers.
On October I, 1973, four Houston investors (George Aubin, Carter Christie. Julio Laguarta, and William Haley, Jr.) borrowed $3,380,000 from Texas Commerce Bank to buy 50,000 shares of South Texas Bank stock at $70 a share. At the same time, eight TCB officers and two retired TCB bankers sold the Aubin group 100 shares each of their South Texas Bank stock.
The South Texas Bank stockholders list of November 22, 1974, shows Charles C. Beall, Jr., E. 0. Buck, John T. Cater, William Davis, Jr., George Ebanks. Thomas McDade, Warner Rogers, and Harry Simms each owning 100 shares. Rogers was senior vice president at TCB before becoming president of American National Bank in Beaumont. Ebanks and Buck are retired TCB officers and the rest, except Cater, are presently officers of TCB.
Three weeks later, on October 24, Michael Doman, regional administrator for national banks, contacted John Cater, then president of Texas Commerce, and raised questions concerning the propriety of the transaction, citing a possible violation of two sections of Title 18 of the United States Code (215, “Receipt of Commissions or Gifts for Procuring Loans”; and 656, “Theft, Embezzlement, or Misapplication by a Bank Officer or Employee”).
“Here is the rub,” said an attorney experienced in bank litigation, who asked not to be identified. “When you finance the purchaser and allow him to borrow money from your bank to buy you individually out at a profit, this could be construed a brokerage and a violation of the code. You can’t get something of value in exchange for making a loan. Also, there is an ethical problem as I see it. That is, lending money to the purchaser who is going to buy your stock, using your bank as the source of lending.”
In May 1974 all ten TCB officers rescinded their stock sale. The Aubin group returned the bankers’ 1000 shares of South Texas Bank stock and the bankers paid back their money plus interest.
In September 1975 government officials subpoenaed documents relating to the transaction but did not call TCB or Aubin group participants to testify before the grand jury until March 5, 1976. Meanwhile, FDIC officials closed South Texas Bank on February 25, finding loan losses exceeded the bank’s capital structure by more than $300,000. FDIC regional counsel Charles Pickett, when asked why South Texas failed, said, ”Bad real estate loans.” Grand jury officers continued to call involved persons through April. Then … silence.
So far, the only casualty may have been TCB ex-president John Cater, who resigned 111 March, citing “personal reasons.” Others close to the situation disagree, saying Cater had one too many “disagreements” with feisty TCB chairman Ben Love. Cater refuses comment. He was replaced by William Heiligbrodt, one of the bank’s officers who had testified before the grand jury.
In May, government prosecutors lost a large bank-small bank case involving Houston’s Bank of the Southwest and the First National Bank of Waco. Waco banker Robert Mann was charged in 1973 with conspiracy to violate federal banking laws. The government alleged that Mann had borrowed $6.9 million from Bank of the Southwest at 3 per cent interest, 5½ per cent below the bank’s prime rate, to purchase the Waco bank, and had agreed to deposit $4 million of the smaller bank’s funds in a non-interest-bearing account at the larger bank. Although Houston newspapers covered the Bank of the Southwest case, no mention has been made of Texas Commerce Bank’s scrutiny by government prosecutors. The “not guilty” verdict in the Mann trial may have discouraged government prosecutors from actively pursuing the Texas Commerce-South Texas Bank case.
Last year, bankruptcies in Dallas County numbered 845, an increase of 185 over 1974. The largest was Coit lnternational, Inc., a retail fabric company which operated 729 retail stores under its corporate umbrella. What makes the Coit bankruptcy so intriguing, in addition to its size, is its vivid portrayal of the intricacies of corporate finance, a world crisscrossed by lines linking businesses, banks, and lawyers.
Less than nine years after it was formed in November 1966, Coit filed for protection under Chapter 11 of the Federal Bankruptcy Act on August 28, 1975, listing $27 million in debts and about $6 million in assets. The Chapter 11 arrangement docs not require total liquidation of assets, but only serves to keep creditors at bay while those firm reorganizes. Coit was forced to close all its larger stores and 181 additional smaller stores in its chain of Fabrific stores and Fabric Centers of America. Today Coit operates 50 small fabric outlets in nine states, including 37 in Texas.
According to a December 26, 1975, letter to shareholders, Robert Coit, chairman of the executive committee, wrote that the 50 retail outlets would continue to operate because $400,000 was borrowed “from an outside source,” arranged by a “nonaffiliated party who also collateralized a portion of the loan.” The $400,000 was paid to prior creditors of the company.
Document Form 8, acquired from the Securities and Exchange Commission in Washington, shows that the “outside source” was Mercantile National Bank in Dallas and the “nonaffiliated party” was Richard C. Strauss, of Realty Development Corporation and son of Dallas lawyer (Akin, Gump, Strauss, Hauer, and Feld) Robert S. Strauss, chairman of the Democratic National Committee.
The document also shows that, in consideration for the younger Strauss’ arranging the loan at Mercantile, “the company has agreed to issue him a ten-year warrant to purchase two million shares of the common stock at an exercise price of ten cent per share. Mr. Strauss intends to transfer warrant to purchase 400,000 shares of common stock to Mr. Charles Kuhn, an individual not affiliated with the company.”
Bankruptcy records in Dallas reveal that Coit’s lawyers—none other than Akin, Gump, Strauss, Hauer, and Feld—received as attorney fees $209,521.49 in August 1975 for representing Coit in the proceedings. The Richard Strauss— Charles Kuhn tie-in is interesting. Kuhn is a member of the board of Valley View Bank, ranked twenty-sixth in Dallas with assets of $26,806,128. The board chairman is Robert S. Strauss. According to a December 1975 Valley View stockholders list, Kuhn, the Strauss family, and Strauss law partners control 157,708 shares, 58 per cent of the bank’s approximately 270,000 total outstanding shares.
There is nothing illegal in these corporate maneuvers, but the emerging mosaic portrays a significant interlinkage between the bankrupt company, the firm’s lawyers, the bank controlled by the bankrupt company’s law firm, and the bankrupt’s benefactor, Richard C. Strauss. The younger Strauss owns 6864 Valley View shares, including some in a children’s investment trust.
Last month Coit announced by letter of intent its determination to buy 1.3 million shares of common stock and 100,000 shares of junior preferred stock of Pioneer Texas Corporation. Pioneer’s main business is selling and leasing data processing equipment and constructing tugboats. Their unaudited statement of April 30, 1976, showed sales of $39 million. Coit’s unaudited report of 38 weeks ending February 20, showed sales of $3.6 million.
LAW & ORDER
I Led Two Lives
An Austin newsman has become the latest journalist to admit that he spied on private citizens for the FBI. Mike Simpson, a radio reporter who spends most of his time these days operating his own security agency, acknowledged that between 1969 and 1971 he filed verbal and written reports on suspected subversive activities in and around the University of Texas at Austin. At the time Simpson was employed on a part-time and sometimes full-time basis with local rock music station KNOW-AM. Simpson conceded he filed or endorsed several reports to the FBI and other “police agencies to allay police fears that criminal activity was going on.” He claimed that in many cases his reports to law enforcement agencies cleared up rumors about members of radical groups, actually helping to protect those individuals.
“There’s nothing wrong with having investigative reports on people because how are you going to determine if they’re guilty of any crime unless you put on paper their activities,” Simpson said. “The fact is that I helped keep this city calm because both sides knew what was going on. Only in the absence of knowledge, the fear of the unknown, do police overreact. They didn’t overreact in Austin. No one was killed and I feel proud of the job I did.” In addition to the FBI, Simpson reported to intelligence units with the Texas Department of Public Safety, Austin police, and University of Texas police.
Simpson, who still works part-time as a field reporter for Austin country station KVET-AM, defends his roles as a reporter and purveyor of information to police agencies. “My right, first of all, as a citizen in this country is to myself and the other citizens of this country regardless of my vocation—the vocation is secondary.” He added that he believes he has not compromised the integrity or credibility of the press, stressing that “it is patriotic of every citizen to guarantee the rights of other people.” Although he received no
salary or retainer for his consultations, Simpson did recall receiving some “expense money” from the FBI. While he was a reporter for K OW, he said, the bureau gave him
$200 to help pay his way to cover the massive peace march in Washington, D.C., in November 1969. A lesser amount was provided for a trip to Cleveland in February 1970 to report on the National Student Anti-War Conference. Simpson emphasized that in the almost two years he was filing reports with law enforcement agencies, he received “less than $1000. I’d probably say it was less than $800.”
Two of Simpson’s former news directors said they were never told by their reporter that he was filing reports with the FBI, although they were aware, as were many of the members of the Au tin news media, that Simpson maintained a tight relationship with law enforcement types. Reports that were broadcast by Simpson on KNOW and KVET won many statewide awards, including laurels for his coverage of the SDS Convention, the infamous storming of the University of Texas Chuckwagon Cafeteria and his reports on the protest surrounding the dedication of the LBJ Library on the UT campus in Austin.