Houston Developer Indicted in Bank Loan Fraud Cases
HOUSTON (AP) _ A federal grand jury has indicted real estate developer J.R. McConnell in what prosecutors said was just the start of one of the biggest bank-loan fraud cases in U.S. history.
The indictment Thursday charged that McConnell and five associates last year arranged loans for $4.2 million through fraud, including false ownership papers for property put up as collateral.
But the two loans listed in the indictment, one at a Houston bank and another at a savings and loan, were only part of a larger scheme to defraud lending institutions of at least $162 million, U.S. Attorney Henry Oncken said.
″This is one of the largest bank-fraud cases in U.S. history utilizing title insurance,″ said Oncken, who promised more indictments as a result of the 18-month FBI investigation.
The six-count indictment named McConnell, 40; Texas National Bank president Walter Beard, 40, of Houston; and former Home Savings Association senior vice president H. Wayne Gray, 48, of Houston, who now works as a loan officer at Houston National Bank.
Others named as defendants were Federal Title Co. president Mary Lynne Smith, 38, of Houston; former McConnell employee Griffith P. Temple, 45, of Cypress; and Temple’s wife, Candace, 40, a former loan officer at Texas National Bank.
All except McConnell ageed to turn themselves in Thursday and were released on $100,000 bond, Assistant U.S. Attorney John Patrick Smith said.
McConnell’s whereabouts have been unknown since shortly after he filed for bankruptcy late last year, but a warrant has been issued for his arrest, FBI agent-in-charge Andrew Duffin said.
In McConnell’s absence, an advertisement appeared in the Houston Post on Thursday. The ad blamed the Texas economy and unfair publicity for McConnell’s problems and promised he would use his own reorganization plan to repay debts. The ad, which indicated McConnell had received 17 death threats, said a future ad would list a mailing address for making claims.
McConnell, a native of Gainesville, Fla., began doing real estate business in Houston in 1979, and amassed a fiefdom of hundreds of rental properties and development projects in Houston and Galveston, according to court records.
But in October 1986, he filed for bankruptcy. According to a court- appointed trustee’s report, McConnell and the 10 companies he took into bankruptcy with him owed $427 million against $281 million in assets. A key part of McConnell’s business, the report said, was Texas Guaranty Investments, which went bankrupt owing 1,400 investors $35 million.
Among McConnell’s adversaries is Los Angeles-based Ticor Title Insurance Co., which has set aside $50 million to cover losses associated with McConnell’s activities, and filed a $202 million suit in July accusing 18 people of helping McConnell in a racketeering and real estate loan fraud scheme.
Attorney Mike Hinton said the Temples would plead not guilty on grounds they were used by McConnell.
Beard said he was surprised and outraged at the indictment.
In connection with the fraudulent loans, the grand jury accused Gray and Beard of making false entries in the books of federally insured lending institutions. Gray was an officer at Home Savings at the time, and Beard still is president of Texas National Bank.
The federal indictments Thursday carry maximum penalties of $250,000 in fines and five years’ imprisonment for each count. McConnell, Smith and Temple each face four counts. Gray and Beard face three counts each, and Mrs. Temple is named in two counts.