I find it curious that “King of the
Hill” is such a popular game in Houston, Texas, since there are no
hills there. In fact, because of all the oil, gas and water pumped
out of the clays underfoot by Texans building their personal hills,
most of the town has subsided 10 feet or more. Consider that
archetypal post war Houston hill climber – Frank Wesley Sharp (above, left).
He was not part of the circle of wealthy, power hungry men who
ran Houston. As one biographer said of the amiable salesman, “He was
in many ways...a loner...He just wanted to win whatever race he was
in at the time.” At forty Frank first experimented in the
northwest suburbs with a development on the cheap. Like the rest of
Houston, his 1946 Oak Forest tract had no zoning laws. It did have
paved streets and water, sewage, gas and power lines - even a golf
course - but Frank left most of the buildings to independent
contractors. Having climbed that hill, however, Frank was now
compelled to find another, higher, mountain to stand upon.
On July 3, 1954, Houston newspapers
screamed, “Sharp Announces Houston's Biggest Home Project.”
Humbly titled Sharpstown, Frank's pièce de résistance was to be a
$200 million 4,000 acre city within the city, with 15,000 homes, an
indoor air conditioned shopping mall, nine churches, seven parks, two
hospitals, two high schools, a golf course, a twin drive-in theater,
three nursing homes, a 750 acre industrial park, six auto
dealerships, even a Jesuit College Prep school And running through
the center of Sharpstown, was a 300 yard wide strip Frank “donated”
to the city, for a brand new freeway aimed at downtown Houston, 9
miles to the northeast. It was a fully planned if not a fully funded
community which only required a $3 million investment from Frank.
And most important of all,. adjacent to
the Sharpstown Center Mall, at 7500 Bellaire Boulevard, Frank built a ten
story office tower that housed the Sharpstown State Bank, which was
Frank Sharp's real money-making scheme. You see, in 1962 (when the
mall opened), as in 1867 when Credit Moblier was chosen as the
general contractor for the transcontinental railroad, as in 1792,
when speculators promoted the swampy Yazoo Lands, Frank Sharp knew
that making “real” money had nothing to do with buying low or
selling high. In a capitalist system, the greatest profit is always
in buying politicians, whose price and morals, are usually cheap.
It was bad luck that Frank Sharp did
not really get rich from Sharpstown. One of his partners died in a
hunting accident midway through the multi-year construction, and the
banks asked for another $5 million to refinance his loan. Frank found
new partners to carry him over, but the interest rates they demanded
were so high, Frank had to promise not to sue them for usury. Two
years later Frank was able to buy himself out of that crushing deal
with $3 million in cash, which he borrowed from George and Herman
Brown. Of course he also had to agree to grant their company, Brown
and Root, exclusive contracts for all future construction in
Sharpstown. The thing about sharks, that sharks often forget, is that
sharks eat sharks.
Still, by the late 1960's, Frank could
finally see the summit, and there was just one last precipice to
overcome. His Sharptown Bank had too low a ratio of deposits to loans
to qualify as a member of the Federal Deposit Insurance Corporation,
the private-slash-government agency that guaranties deposits in
member banks. And without that guarantee, Frank's Sharptown Bank
could not attract the institutional investors and depositors he
needed to firmly establish the foundation of his hill. In July of
1969 Frank met privately with Texas Governor Preston Smith (above) in a
Houston hotel suite to discuss the problem. And, what do you know -
darn - if they didn't came up with a solution.
At the time Governor Smith (above, left center) was locked
in a messy Democratic primary fight, but the winner would go on to
an almost default victory in the general election, since Texas had
been overwhelmingly Democratic for over a hundred years. But whatever
he was going to do, Smith had to do it quickly even if re-elected,
because Texas limited its governors to two year terms. So later that
summer Smith met with his Lieutenant Governor Ben Barnes, who
presided over the State Senate, Speaker of the House Gus Mutscher (above, left),
his aide Rush McGinty, the Speaker's close ally Representative Tommy
Shannon, Attorney General Waggoner Carr (above right), State Insurance Commissioner
John Osorio, and a member of the State Banking Board, Elmer Baum,
who was also Chairman of the Texas Democratic Party. Smith informed
his cabal of his three part plan, suggested by Frank Sharp's problem.
Step one required each member to apply
for a loan from the Sharpstown Bank, which Frank would personally
approve. Cabal members would use those funds to buy stock in another
of Frank Sharp's financial properties, his National Bankers Life
Insurance Company, now based in Dallas. Step two required the
legislature to create a Texas Deposit Insurance program, which would
be much more lenient in their deposit to loan ratio's than the FDIC.
This would put the Texas taxpayers on the hook should the Sharpstown
bank go under, but nobody expected that would happen, since the
guarantee would attract the large institutional investment Frank
Sharp needed to ensure the bank's future.
Step three would see Frank use his new
investors to encourage his customers and associates, like the Strake
Jesuit College, to buy shares of National Bankers Life as it went up,
from $20 to $26 a share. Finally, the cabal members would cash out
their stock, pocketing the profits. It seemed a fool proof plan,
particularly when handled by astute politicians who had almost
complete control of the Texas Legislature. And all went according to
plan. To a point.
Frank approved $600,000 in loans for
the cabal members, which they used to buy Bankers Life stock. The
Texas Deposit Insurance Program was hurriedly passed in the final
late night hours of a special session. But then to the surprise of
many in the cabal, Attorney General Carr issued a public letter
warning that Texas taxpayers would be put at risk insuring banks too
weak to qualify for the FDIC program. That gave Governor Smith an
excuse to veto the bill, which he did. Of course Smith and most of
the cabal sold their Banker's Life stock before he signed the veto.
Preston Smith was not stupid.
All told, the cabal members made about
$250,000 in profits. Governor Smith alone made a $62,500 profit . The
head of the Texas House Appropriations, Bill Heatly, made just under
$50,000. Rush McGinty, made about $45,000 . And Rep. Tommy Shannon
profited $37,000. But that left Frank's other customers who had
trusted and believed in him, like the Jesuits, holding the Bankers
Life stock on its way down. The Jesuit college lost $6 million
dollars after the Governor's veto was announced. And being sore
losers in this King of the Hill game, they called the Federal
Securities and Exchange Commission.
Two years later, on January 18th,
1971, Governor Smith was inaugurated to his second term. But the
Austin celebratory parade was disrupted by angry crowds, cursing and
throwing bottles at the floats and marching bands. That very
afternoon in Dallas, the U.S. Department of Justice had publicly
indicted several members of the cabal, and Governor Smith had been
named as an unindicted co-conspirator. The public reaction was
immediate and extremely angry. By the end of the month the SEC had
seized the Sharpstown State Bank. Examining its books they were
unable to locate $16 million. And even though the bank was not a
member, the FDIC paid the private depositors in full, up to $20, 000.
By the end of February the National Bankers Life Insurance
Corporation had also been seized. Civil suits were flying, and two
dozen elected and appointed state officials were charged in Federal
and State courts with crimes. For a time it looked like people were
actually going to jail. .
The February 1972 trial of Speaker
Mutscher, Rep Shannon and aide Rush McGinty was moved to Abilene,
Kansas because of pretrial publicity in Austin. And on March 15th
, after two hours of deliberation, a jury found them guilty. The very
next day Federal Judge J. Neil Daniel sentenced them each to five
years...probation. Gus Mutscher had his conviction thrown out on
appeal, and was later elected as a judge for Washington County,
Texas. At his trial in Dallas, Frank W. Sharp was sentenced to three
years...probation. He also paid a fine. Of $5,000, or about 1/15 of
the profit made on Sharpstown Bank Scandal. In the next election
cycle, about half of the state legislature was replaced, but the
Democrats retained control of both houses.
In the end only one politician actually
went to jail - Walter Knapp Jr (above), a four term Democratic Representative
from Amarillo. He was not involved in any part of the cabal, but in
the attendant publicity he was convicted of stealing $1,200 worth of
postage stamps, which he traded for a new pickup truck. For that
crime Walter Knapp was sentenced to four years in prison, and there
was no probation for him. He served a year, before an appeals court
judge ordered a new trial, and released Walter on bail. In March of
1974, his wife Nancy, divorced him, and over Thanksgiving that year
she remarried. In December Walter confronted Nancy on an Amarillo
street and shot her in the head. When police confronted him, Walter
shot himself.
Governor Smith (above) remained an uninidicted
conspirator, and although he tried to run for re-election, he was
eliminated in the Democratic primary. In 1974 he started his own
bank in Lubbock, Texas, and in 1986 transferred to Great Western
Mortgage Company. He died in 2003.
Frank Welsey Sharp never shot anybody.
He never stole $1,200 in petty cash. He never committed a violent
crime in his life, unless you consider bankrupting families and
emptying college funds a violent act. .In his final years, he liked
to wander the mall he had built, talking to shoppers and business
owners. It was all that was left of the hill he had named after
himself and then clambered atop Frank died peacefully, at 87 years
of age, in 1993. And in Houston, a new generation is still playing King of
the Hill, which still remains, a game of winner-take-all by any means
possible..
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