Texas Land/Bank Fraud
First Some Background:
ORGANIZED CRIME, THE CIA AND THE SAVINGS AND LOAN
SCANDAL
The savings and loan scandal of the 1980s has been depicted in a myriad of ways. To some,
it is "the greatest ... scandal in American history" (Thomas, 1991: 30). To
others it is the single greatest case of fraud in the history of crime (Seattle Times,
June 11, 1991). Some analysts see it as the natural result of the ethos of greed
promulgated by the Reagan administration (Simon and Eitzen, 1993: 50). And to some it was
a premeditated conspiracy to move covert funds out of the country for use by the U.S.
Intelligence Agency (Bainerman, 1992: 275). All of these depictions of the S & L
scandal contain elements of truth. But to a large degree, the savings and loan scandal was
simply business as usual. What was unusual about it was not that it happened, or who was
involved, but that it was so blatant and coarse a criminal act that exposure became
inevitable. But with its exposure, three basic but usually ignored "truths"
about organized crime were once again demonstrated with startlingly clarity:
There is precious little difference between those people who society designates as
respectable and law abiding and those people society castigates as hoodlums and thugs.
The world of corporate finance and corporate capital is as criminogenic and probably more
criminogenic than any poverty-wracked slum neighborhood.
The distinctions drawn between business, politics, and organized crime are at best
artificial and in reality irrelevant. Rather than being dysfunctions, corporate crime,
white-collar crime, organized crime, and political corruption are mainstays of American
political-economic life.
It is not our intent to discuss the unethical and even illegal business practices of the
failed savings and loans and their governmental collaborators. The outlandish salaries
paid by S & L executives to themselves, the subsidies to the thrifts from Congress
which rewarded incompetence and fraud, the land "flips" which resulted in real
estate being sold back and forth in an endless "kiting" scheme, and the
political manipulation designed to delay the scandal until after the 1988 presidential
elections are all immensely interesting and important. But they are subjects for others'
inquiries. Our interest is in the savings and loans as living, breathing organisms that
fused criminal corporations, organized crime, and the CIA into a single entity that served
the interests of the political and economic elite in America. Let us begin by quickly
summarizing the most blatant examples of collaboration between financial institutions, the
mob, and the intelligence community.
First National Bank of Maryland: For two years, 1983-1985, the First National Bank of
Maryland was used by Associated Traders, a CIA proprietary company, to make payments for
covert operations. Associated traders used its accounts at First National to supply $23
million in arms for covert operations in Afghanistan, Angola, Chad, and Nicaragua
(Bainerman, 1992; 276-277; Covert Action 35, 1990).
The links between the First National Bank of Maryland and the CIA were exposed in a
lawsuit filed in Federal District Court by Robert Maxwell, a high-ranking bank officer.
Maxwell charged in that suit that he had been asked to commit crimes on behalf of the CIA.
Specifically, he charged that he was asked to conceal Associated Traders' business
activities, which by law he was required to specify on all letters of credit. Maxwell
alleged that he had been physically threatened and forced to leave his job after asking
that his superiors supply him with a letter stating that the activities he was being asked
to engage in were legal. In responding to Maxwell's lawsuit, attorneys for the bank state
that "a relationship between First National and the CIA and Associated Traders was
classified information which could neither be confirmed nor denied (Bainerman, 1992:
276-277; Washington Business Journal, February 5, 1990).
Palmer National Bank: The Washington, D.C.-based Palmer National Bank was founded in 1983
on the basis of a $2.8 million loan from Herman K. Beebe to Harvey D. McLean, Jr. McLean
was a Shreveport Louisiana businessman who owned Paris (Texas) Savings and Loan. Herman
Beebe played a key role in the savings and loan scandal. Houston Post reporter Pete
Brewton linked Beebe to a dozen failed S & L's, and Stephen Pizzo, Mary Fricker, and
Paul Muolo, in their investigation of the S & L fiasco, called Beebe's banks
"potentially the most powerful and corrupt banking network ever seen in the
U.S." Altogether, Herman Beebe controlled, directly or indirectly, at least 55 banks
and 29 S & L's in eight states. What is particularly interesting about Beebe's
participation in these banks and savings and loans is his unique background. Herman
Beebe had served nine months in federal prison for bank fraud and had impeccable
credentials as a financier for New Orleans-based organized crime figures, including
Vincent and Carlos Marcello (Bainerman, 1992: 277-278; Brewton, 1993: 170- 179).
Harvey McLean's partner in the Palmer National Bank was Stefan Halper. Halper had served
as George Bush's foreign policy director during the 1980 presidential primaries. During
the general election campaign, Halper was in charge of a highly secretive operations
center, consisting of Halper and several ex- CIA operatives who kept close tabs on Jimmy
Carter's foreign policy activities, particularly Carter's attempt to free U.S. hostages in
Iran. Halper was later linked both to the "Debategate" scandal, in which it is
alleged that Carter's briefing papers for his debates with Ronald Reagan were stolen, and
with "The October Surprise," in which it is alleged that representatives of the
Reagan campaign tried to thwart U.S. efforts to free the Iranian hostages until after the
presidential election. Halper also set up a legal defense fund for Oliver North.
During the Iran-Contra Affair, Palmer National was the bank of record for the National
Endowment for the Preservation of Liberty, a front group run by Oliver North and Carl
"Spitz" Channell, which was used to send money and weapons to the contras.
Indian Springs Bank: Another bank with clear connections to the CIA was the Indian Springs
Bank of Kansas City, Kansas (Bainerman, 1992: 279-280; Brewton, 1993: 197-200). The fourth
largest stockholder in Indian Springs was Iranian expatriate Farhad Azima, who was also
the owner of an air charter company called Global International Air. The Indian Springs
bank had made several unsecured loans to Global International Air, totaling $600,000 in
violation of the bank's $349,00 borrower limit. In 1983 Global International filed for
bankruptcy, and Indian Springs followed suit in 1984. The president of Indiana Springs was
killed in 1983 in a car fire that started in the vehicle's back seat and was regarded by
law enforcement officials as of suspicious origins.
Global International Air was part of Oliver North's logistical network which shipped arms
for the U.S. government on several occasions, including a shipment of 23 tons of TOW
missiles to Iran by Race Aviation, another company owned by Azima. Pete Brewton, in his
investigation of the Indian Springs bank collapse was told that FBI had not followed up on
Indian Springs because the CIA informed them that Azima was "off limits"
(Houston Post, February 8, 1990). Similarly the assistant U.S. Attorney handling the
Indian Springs investigation was told to "back off from a key figure in the collapse
because he had ties to the CIA."
Azima did indeed have ties to the CIA. His relationship with the agency goes back to the
late 1970s when he supplied air and logistical support to EATSCO (Egyptian American
Transport and Services Corporation), a company owned by former CIA agents Thomas Clines,
Theodore Shackley, and Richard Secord. EATSCO was prominently involved in the activities
of former CIA agent Edwin Wilson, who shipped arms illegally to Libya. Azima was also
closely tied to the Republican party. He had contributed $81,000 to the Reagan campaign.
Global International also had other unsavory connections. In 1981, Global International
made a payment to organized crime figure Anthony Russo, a convicted felon with a record
that included conspiracy, bribery, and prostitution charges. Russo was the lawyer of
Kansas City organized crime figures, an employee of Indian Springs, and a member of the
board of Global International. Russo later explained that the money had been used to
escort Liberian dictator Samuel Doe on a "goodwill trip" to the U.S.
Global International's planes based in Miami were maintained by Southern Air Transport,
another CIA proprietary company. According to Franck Van Geyso, an employee of Global
International, pilots for Global International ferried arms into South and Central America
and returned to Florida with drugs. Indian Springs also made a loan of $400,000 to Morris
Shenker, owner of the Dunes Hotel in Las Vegas, former attorney for Jimmy Hoffa, and close
associate of Nick Civella and other Kansas City organized crime figures. At the time the
loan to Shenker was made, he, Civella, and other Kansas City mobsters were under
indictment for skimming $280,000 from Las Vegas' Tropicana Casino.
Vision Banc Savings: In March, 1986, Robert L. Corson purchased the Kleberg County Savings
and Loan of Kingsville, Texas, for $6 million, and changed its name to Vision Banc Savings
(Bainerman, 1992: 280-281; Brewton, 1993: 333-351). Harris County, Texas, judge Jon
Lindsey vouched for Corson's character in order to gain permission from state regulators
for the bank purchase. Lindsey was the chairman of the Bush campaign in 1988 in Harris
County and later received a $10,000 campaign contribution and a free trip to Las Vegas
from Corson (Houston Post, February 11, 1990).
Corson was well-known to federal law enforcement agents as a "known money
launderer" and a "mule for the agency," meaning that he moved large amounts
of cash from country to country. When Corson purchased Vision Banc, it had assets in
excess of $70 million. Within four months it was bankrupt. Vision Banc engaged in a number
of questionable deals under Corson leadership, but none more so that its $20 million loan
to Miami Lawyer Lawrence Freeman to finance a real estate deal (Houston Post, February 4,
1990). Freeman was a convicted money launderer who had cleaned dirty money for Jack
Devoe's Bahamas-to-Florida cocaine smuggling syndicate and for Santo Trafficante's
Florida- based organized crime syndicate. Freeman was a law partner of CIA-operative and
Bay of Pigs paymaster Paul Helliwell. Corson, in a separate Florida real estate venture
costing $200 million, was indicted on a series of charges.
Hill Financial Savings: Vision Banc was not the only financial institution
involved in Freeman's Florida land deals. Hill Financial Savings of Red Hill,
Pennsylvania, put in an additional $80 million (Brewton, 1993: 346-348) . The Florida land
deals were only one of a series of bad investments by Hill Financial which led to
collapse. The failure of Hill Financial, alone, cost the U.S. treasury $1.9 billion.
Sunshine State Bank: The cast of characters surrounding the Sunshine State Bank of Miami
also included spies, White House operatives, and organized criminals (Bainermann, 1992:
281; Brewton, 1993: 310- 312, 320-323). The owner of the Sunshine State Bank, Ray Corona,
was convicted in 1987 of racketeering, conspiracy, and mail fraud. Corona purchased
Sunshine in 1978 with $1.1 million in drug trafficking profits supplied by Jose Antonio
"Tony" Fernandez, who was subsequently indicted on charges of smuggling 1.5
million pounds of marijuana into the U.S.
Among Corona's customers and business associates were Leonard Pelullo, Steve Samos, and
Guillermo Hernandez-Cartaya. Pelullo was a well-known associate of organized crime figures
in Philadelphia, who had attempted to use S & L money to broker a major purchase of an
Atlantic City Casino as a mob frontman. Pelullo was charged with fraud for his activities
at American Savings in California. Steve Samos was a convicted drug trafficker who helped
Corona to set up Sunshine State Bank as a drug money laundry. Samos also helped set up
front companies that funneled money and weapons to the Contras. Guillermo
Hernandez-Cartaya was a veteran CIA operative who had played a key role in the Bay of Pigs
of invasion. He also had a long career as a money launderer in the Caribbean and in Texas
on behalf of both the CIA and major drug trafficking syndicates.
Mario Renda, Lender to the Mob: Mario Renda was a Long Island money broker who brokered
deposits to various savings and loans in return for their agreement to loan money to phony
companies (Brewton, 1993: 45-47; 188-190; Pizzo et al. 1989: 466-471). Renda and his
associates received finders fees of 2 to 6 percent on the loans, most of which went to
individuals with strong organized crime connections who subsequently defaulted on them.
Renda brokered deals to 160 Savings and Loans throughout the country, 104 of which
eventually failed. Renda was convicted of $16 million from an S & L and for tax fraud.
Renda also served CIA and National Security Council interests as a money broker helping
arrange for the laundering of drug money through various savings and loans on behalf of
the CIA. He then obtained loans from the same S & L's, which were funneled to the
Contras. An organized crime-related stockbroker, a drug pilot, and Renda were all
convicted in the drug money laundering case.
Full-Service Banking: All told at least twenty-two of the failed S & L's can be tied
to joint money laundering ventures by the CIA and organized crime figures (Glassman, 1990:
16-21; Farnham, 1990: 90-108; Weinberg, 1990: 33; Pizzo, et al., 1989: 466-471). If the
savings and loan scandals of the 1980s reveal anything, they demonstrate what has often
been stated as a maxim in organized crime research: that corruption linking government,
business, and syndicates is the reality of the day-to-day organization of crime.
Investigations of organized crime in the United States,
Europe, and Asia have all uncovered organized crime networks operating with virtual
immunity from law enforcement and prosecution. Chambliss' study of organized crime in
Seattle exposed a syndicate that involved participation by a former governor of the state,
the county prosecutor, the police chief, the sheriff, at least 50 law enforcement
officers, leading business people, including contractors, realtors, banks, and corporation
executives, and, of course, a supporting cast of drug pushers, pimps, gamblers, and
racketeers (Chambliss, 1978). The Chambliss study is not the exception but the rule. Other
sociological inquires in Detroit, Texas, Pennsylvania, New Jersey, and New York have all
revealed similar patterns (Albini, 1971; Block, 1984; Block and Chambliss, 1981; Block and
Scarpitti,1985; Jenkins and Potter, 1989; 1986; Potter and Jenkins, 1985; Potter, 1994).
As Chambliss comments:
In the everyday language of the police, the press, and popular opinion, "organized
crime" refers to a tightly knit group of people, usually alien and often Italian,
that run a crime business structured along the lines of feudal relationships. This
conception bears little relationship to the reality of organized crime today. Nonetheless,
criminologists have discovered the existence of organizations whose activities focus on
the smuggling of illegal commodities into and out of countries (cocaine out of Colombia
and into the United States and guns and arms out of the United States and into the Middle
East, for example); other organizations, sometimes employing some of the same people, are
organized to provide services such as gambling, prostitution, illegal dumping of toxic
wastes, arson, usury, and occasionally murder. These organizations typically cut across
ethnic and cultural lines, are run like businesses, and consist of networks of people
including police, politicians, and ordinary citizens investing in illegal enterprises for
a high return on their money.
Gary W. Potter
Eastern Kentucky University
padpotte@acs.eku.edu
The Latest Bush Administrative Scandal.
"The Texas Commission on Alcohol and Drug Abuse,
moving to tighten financial controls that failed to forecast the agency's $28 million
shortfall this year, laid off 39 employees Wednesday -- including the budget director
responsible for monitoring agency finances....The move by the commission is the latest in
its efforts to tighten fiscal controls and avert a $28 million budget shortfall, which
went undetected for nearly three months of the fiscal year that began Sept. 1....Gov.
George W. Bush put the agency, which oversees Texas' drug treatment and prevention
programs and licenses substance abuse counselors and facilities, into conservatorship in
1995 amid allegations that millions of dollars were misspent because of lax rules. It was
taken out of conservatorship in 1996 after auditors ultimately whittled down questionable
spending to about $900,000." --AAS, 3/16/00
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