S&Ls, Big Banks and Other Triumphs of Capitalism (Page 11)

11. THE C.I.A. AND THE MOB

So many billions of dollars disappeared that one has to ask, where in hell did it all go? Joe Selby, who was one of the bank board's much-hated examiners in Texas, says, "A lot of money got put into people's pockets and they've rat-holed it somewhere. Some of it is in artwork, fancy homes, fancy airplanes and Rolls Royces. Some of it went to Rolex watches, lizard shoes, hunting parties and yachts."

That's too skimpy an explanation. No ratholes are big enough. Even if to Selby's list you added all the cigarette boats and trips to European spas and Las Vegas outings and politicians bought, it wouldn't be enough of an explanation.

It probably can't be accounted for by totting up the miles and miles of empty office buildings and decaying condos. So where did the rest wind up? A theory pursued by a few reporters, but very few, is that a big hunk, a really big hunk, of the money wound up in the coffers of the underworld and the C.I.A. and that the former has stashed it offshore and the latter blew it on covert operations.

Pete Brewton, a very stubborn reporter for The Houston Post, has found possible links with the C.I.A. and the mob in at least twenty-two failed thrifts, including sixteen in Texas. Some of the people linked to the defrauded thrifts were involved in gunrunning, drug smuggling, money laundering and covert aid to the Nicaraguan contras.

A typical Brewton case: In March 1986 Houston developer Robert Corson bought the Kleberg County (Texas) Savings and Loan for $6 million and changed the name to Vision Banc Savings. To get his thrift, Corson reportedly used a letter of recommendation from a judge who in 1988 would head George Bush's presidential campaign in Harris County (Houston). Later the judge said he hardly knew Corson. So why did he write the letter? Was it a favor to Vice President Bush, who was keenly aware that the C.I.A. was desperately hustling money to get around the Congressional ban on support for the contras? Brewton claims "Corson is identified in federal law enforcement records as a 'known money launderer' " and says that "one former CIA operative" told him that Corson "frequently transported large sums of cash...for the agency."

At the time of the purchase, the thrift had assets of $70 million. Four months later it was insolvent. How come? Partly, says Brewton, because of a $20 million loan to help finance a Florida land deal. Corson's thrift lost $17 million of the $20 million. Another thrift, Hill Financial Savings in Red Hill, Pennsylvania, put up $80 million to seal the land deal; it lost $40 million. Something fishy? Brewton says the Pennsylvania thrift, which has since gone bankrupt, had ties to the C.I.A. and organized crime, as did one of the men who put the land deal together, Miami lawyer Lawrence Freeman, a convicted money launderer for drugrunners.

Brewton's stories have not exactly stirred the national press to action. Under the very accurate head "The Story Hardly Anyone Wants to Touch," the July Washington Journalism Review reported that "no major newspaper has yet followed up on the stories, and they have received only the briefest of mentions when they have been noted." After reading only one of Brewton's pieces, Jerry Knight of The Washington Post, who has done some good S&L stories, dismissed the whole series as "bullshit...so thin, so poorly sourced."

But not everyone feels that way. Kathleen Day, who covered the S&Ls for The Washington Post before taking a leave to write a book on the mess, told W.J.R., "If I were still the key person on the beat, I would be looking into those stories. The thrift industry is not dismissing them. Given the gravity of the situation and how much the mainline press has missed, I'm surprised there hasn't been more delving into it."

Houston Post editor in chief David Burgin, understandably smarting from the "world records for arrogance" set by the Eastern press, says, "The [Washington] Post has been asleep. [They] blew Iran-contra, and they blew HUD, and now they're going to blow this." But no more than The New York Times, which, except for a few smashing stories by Jeff Gerth that made it to the front page, has kept most of the S&L stuff buried in the financial section. One reason Brewton's C.l.A.-underworld stories have been treated so lightly is that the only attention they stirred in Congress was a ridiculously inept "investigation" by a subcommittee headed by that unscrupulous boob Frank Annunzio, who, though known to have had his hand out to the thrift lobby over the years (and who in 1985 introduced a resolution that would allow thrifts to go on making wild investments), now goes around wearing a button that reads "Put the S&L Crooks in Jail." Nobody takes him or anything he does seriously.

The few other reporters who have been down the C.I.A.-Mafia path at least partway do take Brewton's conspiracy allegations rather seriously. In Inside Job, Pizzo, Fricker and Muolo write that toward the end of their long investigation they began to pick up reports of C.I.A. involvement. "Experts had wondered how so many billions of dollars could just vanish from the thrift industry without a trace. If some of that money were channeled into the Contra pipeline or used to serve other legal or illegal covert purposes, that could certainly be one answer.... We didn't have time to investigate both that story and this one, but we want to be on the record as saying that we finally came to believe something involving the CIA and Contras was going on at the thrifts during the 1980s. After all, deregulation created enough chaos to accommodate just about anyone's purposes. And taking out loans from federally insured institutions, giving the money to the Contras, and letting federal insurance pick up the losses does have the flavor of what Ollie North might think was a 'neat idea.' "

Mob Rule

They don't have time for the C.I.A., but on the other hand, Pizzo, Fricker and Muolo give plenty of space to the underworld's presence. At the very heart of their fascinating book is Herman Beebe, a son of perhaps the most casually corrupt state in the nation, Louisiana. He would eventually go to prison for S&L fraud.

Beebe's first bank was the Bossier Bank & Trust in Bossier City, Louisiana. According to Brewton, Beebe in 1983 arranged for his Bossier Bank to lend about $2.8 million to Harvey McLean Jr. to help launch the Palmer National Bank in Washington, D.C.--the same one that later channeled money to Ollie North's Swiss bank accounts. McLean and Stefan Halper had met while working in Bush's 1980 presidential campaign, Halper as policy director and McLean as fundraiser. After the campaign Halper, who is the former son-in-law of Ray Cline, once the C.I.A.'s deputy director, went to work at the State Department and McLean became what Brewton calls "a major player in a number of failed Texas savings and loans."

After his Bossier beginnings, Beebe eventually built what Inside Job calls "potentially the most powerful and corrupt banking network ever seen in the U.S.," stretching over fifty-five banks and twenty-nine savings and loans, in six Southern states and Colorado, California and Ohio. His "influence in banking circles was so pervasive by the mid-1980s that he could be connected in some way to almost every dying bank or savings and loan in Texas and Louisiana, yet few people had ever heard his name." But he was well known by such mud-splattered politicians as Louisiana's former governor Edwin Edwards, whom Beebe once had on his payroll at $100,000 a year.

Was Beebe also a business associate of Carlos Marcello, Mafia boss of New Orleans? There were plenty of rumors to that effect, and rumors are about all Inside Job is going to give you. The Dallas Morning News once reported that "usually reliable federal sources" said Beebe's bank was suspected of being a conduit for some of the mob's Las Vegas skimmings. Beebe, who denies all underworld ties, parried with a $12 million libel suit. But he dropped it when the News promised not to make public any more of the information it had found out about him.

After Beebe was convicted of fraud, he had a period of financial woe during which he was helped along with $30 million in loans from Southmark Inc., a huge (thanks to Drexel junk bonds) Dallas-based conglomerate. None of the books reviewed here give us much of a handle on Southmark, but, ah, the rumors they spin 'round it. The Inside Job trio say one of the rumors they didn't have time to follow came from a reliable source who "told us he had phone records showing that a real estate broker who had dealings with both Southmark and Carlos Marcello had also made phone calls to Major General John Singlaub, of Contra-gate fame." So what would phone calls prove? Maybe nothing. And Inside Job's claim that they "found Southmark's fingerprints at Silverado Savings" is pretty skimpy, too.

But one can draw firm conclusions about Southmark's character from what happened at its subsidiary, San Jacinto Savings. According to Brewton, "When Southmark bought San Jacinto, the thrift had relatively modest assets of less than $500 million. But the total soon mushroomed, in part because San Jacinto began to attract deposits from organized crime associates. Federal regulators say the organized crime money included millions of dollars in deposits that were brokered by Mario Renda, a New York Mafia associate who is in prison for bank fraud and racketeering."

San Jacinto, whose assets reached $3.3 billion, failed. Brewton says its troubles are the handiwork of Joseph Grosz, senior vice president of San Jacinto and president of Southmark Funding, a subsidiary of Southmark. Grosz, says Brewton, is "a mysterious figure who is part of a circle of Chicago investors that has links to organized crime and the CIA." (Sometimes, I must admit, Brewton's use of the words "links" and "ties" and "connections to," because no explanatory data come with them, makes me want to yell rude things at him. I assume, though, that The Houston Post is just as fearful of libel suits as any other newspaper, and Brewton must have told his editors enough background stuff to make them feel comfortable.)

So how much emphasis should we put on the Mafia and the C.I.A.? Neither Brewton nor the Inside Job trio claim that the fall of the thrift industry should be attributed entirely to the influence of the mob. But they sound convinced that federal investigators are stupidly (or selfishly) underplaying underworld influence. The Inside Job authors say, "We were told repeatedly by regulators, and even Justice Department officials, that the Mafia, the mob, organized crime, the Syndicate, whatever label you choose, had not and could not infiltrate the thrift industry in any serious way." But these three reporters found that the bureaucracy was trying to hoodwink them, and that in fact, "at nearly every thrift we researched for this book we found clear evidence of either mob, Teamster, or organized crime involvement." The familiar names cropped up again and again: Gambino, Genovese, Lucchese, Bonanno, Colombo, Marcello, Trafficante.

"Did the leadership of these families have a sit-down one day and decide to loot S&Ls? Clues that surfaced at dozens of savings and loans convinced us that some form of coordinated operation existed. The evidence was overwhelming that the Mafia was actively looting S&Ls--in various, widely disparate locations, at the same time, in the same ways, often using the same people."

Granting all that, it would still be a great mistake to become so fascinated by the cobwebby trail of the C.I.A. and the flickering shadows of the underworld that we forget for even a moment who the main criminals are: "respectable" financiers and their getaway drivers in Congress, in the bureaucracy and in the White House.

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