INSIDE JOB
The Looting of Americans
Savings and Loans
By Stephen Pizzo,
Mary Fricker
and Paul Muolo
The Looting of Americans
Savings and Loans
By Stephen Pizzo,
Mary Fricker
and Paul Muolo
CHAPTER NINE
Buying Deposits
When regulators removed most restrictions on brokered deposits, beginning in
1980, officers at many financial institutions got in line to use the services of the new deposit brokers who set up shop around the country. Among the institutions whose officers saw the advantage of using brokered deposits was Penn Square
Bank, a small shopping-center bank in Oklahoma City, and soon the officers on the bank's money desk knocked on Mario Renda's new door at First United
Fund. The bank's officers used the brokered deposits from First United Fund
(and from other deposit brokers) to finance risky lending in the oil business,
which was booming. 1 In July 1982, Penn Square Bank collapsed, the sixth largest
commercial bank failure in U.S. banking history.2
Thus it was that on September 30, 1982. at the very moment Winkler's and
Renda's operation at Indian Springs State Bank was coming to life, Renda got some very unwelcome attention. Representative Fernand St Germain (D-R.I.),
chairman of the House Banking Committee, conducted hearings into the Penn
Square Bank failure and wanted to know, among other things, what role deposit
brokers had played in the Penn Square disaster.3 He summoned Renda and
others to testify before the committee. The hearings put the spotlight on deposit
brokers like First United Fund and threatened to result in a curtailment of their
activities. By this time, however, the Reagan administration had put its full
political muscle behind deregulation, and Treasury Secretary Donald Regan
(a.k.a. "the father of brokered deposits") had the president's car. Washington
was marching in unison on a deregulation course that even the Penn Square
catastrophe couldn't head off, and deposit brokers survived their congressional
grilling unscathed.
Emboldened by this close encounter, Renda saw no need at all to stop his operation at Indian Springs bank. It went off like clockwork:
First United Fund proceeded to place $6 million in deposits at Indian
Springs State Bank;
Daily's straw borrowers received $7 million in loans;
The straw borrowers were paid their fee and they turned the loan proceeds
over to Daily, Winkler, and Renda.
Renda became bullish on the future. He moved First United Fund from its cramped offices on Old Country Road in Garden City, out in suburban Long
Island, to elaborate suites on Franklin Avenue. He maintained a bull pen of
brokers who spent their days on the phones placing deposits at institutions around
the country. In late 1982 he employed 15 brokers (later to swell to 40) in First United's bull pen, and many of them were pulling down six-figure commissions.
But Renda's methods and those of a handful of other deposit brokers attracted
still more unwelcome publicity. After a few large credit unions complained that
their accounts had been "bilked" by such brokers, NBC-TV produced a news
documentary on the problem and they interviewed Renda for the piece. Renda
relished the exposure. After standing up to congressional scrutiny, he had become
cocky. Following the airing of the NBC program he would end his morning
pep talk to his staff by standing up and saying, "Okay, boys, get out there and
bilk em."
A frequent visitor to Renda's new offices was Salvatore Piga, whom organized
crime investigators identified to us as a Lucchese (Mafia) family associate. An
assistant U.S. attorney described him as a "ruthless leg breaker," and his rap
sheet showed a string of arrests for grand larceny, assault, robbery, burglary,
extortion, and criminal possession of stolen property. Mario, on the other hand,
called Piga a "teddy bear." Piga was in his early fifties, stocky, and in top physical
shape, and he carried what the bull-pen brokers called a "cannon" under his
coat. Sal, with his gun bulging, added more than just a touch of color around
First United Fund.
As 1983 began the future was looking good at First United Fund. Mario
and his brokers had placed $2. 5 billion in 1982 and expected business to increase dramatically in 1983. Renda bragged widely that he could put $50 million into any institution on a day's notice. One day Winkler visited a banker and put
forward the familiar linked-financing scheme. The banker was skeptical that Renda could actually produce the deposits. Winkler picked up the phone and
called New York.
"Mario," he said, "deposit $1 million in this bank tomorrow morning." To
the banker's amazement, it was done. What more needed to be said?
Franklin, Leslie, and Mario frequently visited each other in Hawaii and
New York. Renda was becoming an important man in Hawaii, thanks to the straw borrowers' money, much of which was going into Hawaiian real estate. When we looked at Renda's Hawaiian activities, we found Consolidated Savings owner Robert Ferrante Renda and Ferrante were involved together in a company
called Seaside Ventures, which was converting an old hotel into offices.
Attorneys for the FSLIC said Consolidated Savings made Seaside Ventures a $2.2 million loan. Renda later testified that he wired the money straight to his
personal Swiss bank account. Walter Mitchell, the Redondo Beach city councilman
who went to prison after being accused of taking a bribe from Ferrante,
got a job with Seaside Ventures in Hawaii after he got out of prison. (Part of
his conviction was later overturned.)
When we found out that Renda and Ferrante were doing more than deposit
business together, we looked deeper into their relationship. We discovered they
had been associates for several years, and we obtained documents that showed
they were also invoked together in at least two other major projects, the Kailua
Shopping Center in Hawaii and the Palace Hotel in Puerto Rico. (The casino
deal was never completed and the project ended in bankruptcy.) An FSLIC
attorney later told us that Renda and Ferrante vacationed together in the Caribbean
in 1986, renting First United Fund's 100-foot yacht Surrender for the
occasion. Ferrante, invoices show, paid the boating tab with a $15,000 Consolidated
check. Poking around these leads, we found out that the FBI in Los
Angeles had a keen interest in the Ferrante-Renda relationship. Maybe that was why the folks at Consolidated were unusually concerned that Renda's association
with Ferrante not become general knowledge. On at least one occasion, S&L
records showed, Ottavio Angotti chastised a secretary who had written "copies
to Mario Renda" on the bottom of a memo. Angotti X'ed out Renda's name
and told her she was not to do that again.
Renda was building an empire in Hawaii, but his well-oiled machine suddenly developed a squeak in Kansas City. In February 1983, FDIC examiners,
who had given the Indian Springs State Bank boob a thorough going-over, said
they weren't fooled by Winkler's and Daily's straw borrowers and declared that
the numerous Hawaii loans, which totaled $3.7 million, were in reality one big
loan. Examiners still weren't clear about what was going on there, but they were
sure all these loans were part of one big venture of some sort. Since loans-to- one-borrower limits at Indian Springs State Bank were then about $350,000,
examiners had identified what one former Indian Springs official termed "a monumental loan-limit violation." Regulators told Lemaster that these Hawaii
borrowers had to repay the loans.
Lemaster gave Daily the bad news: Regulators had ordered that the Hawaii
loans be repaid and no further loans made. The original plan to roll the loans
over (renew them) through Indian Springs bank when they came due was now out of the question. But Winkler and Daily told Lemaster there was no way
they could repay the loans. The money was long gone. If was then that Lemaster
began to see he was caught in a trap. Renda had anesthetized his sound banking
instincts with First United Fund's brokered deposits, which Lemaster had hoped
to use to build Indian Springs State Bank into one of the leading banks in the
state. But now his reputation for integrity, cultivated through years of hard work
and dedication, was in real jeopardy. Acquaintances said it was at this point that Lemaster "began to go over to the dark side." Apparently he saw he had little
to lose. The metamorphosis was startling to those who had known him for years. He lost his dignified ambassadorial air and replaced it with glitz, adopting Russo's more flashy image.
But Lemaster's problems in no way dampened Anthony Russo's enthusiasm
for Renda's linked-financing scheme. Regulators learned that Russo had been
holding seminars around town to teach other bank and thrift officials how they,
too, could attract Renda's brokered deposits and then loan the money out to Winkler's and Daily's "qualified" investors as built-in customers. Renda paid Russo a finder's fee for bringing new institutions into the fold. Russo later admitted that, thanks to his efforts, just as Winkler and Renda were wondering
how they were going to replace Indian Springs State Bank as a source of money
a new convert showed up to fill the gap—Coronado Savings and Loan, a neighbor
in the shopping center with Indian Springs State Bank. Renda promptly brokered
$4.7 million into Coronado Savings, and Coronado in turn loaned Winkler, et
al, $3. 3 million. Renda discovered that savings and loans were even easier targets than banks because, on the whole, their management was less sophisticated.
"Renda used to tell his troops at First United Fund that as stupid and sheep like
as bankers were, savings and loan officials were on an even lower grade of
intelligence," an investigator recalled later. "Consequently, Renda began focusing a great deal of energy on linked financing with savings and loans."
By May 1983 Lemaster was under severe pressure from regulators to resolve the Hawaii loan violation. In desperation, Lemaster bypassed Winkler and Daily
and wrote directly to their straw borrowers, informing them that their loans were coming due and had to be repaid in full. Lemaster's letter came like a bolt of
lightning out of a clear blue sky for the straw borrowers, who then converged on their keeper, Sam Daily. They'd been told by Daily not to worry about their loans, so why was Lemaster threatening them, they wanted to know. Daily
turned to Winkler for help, demanding that he tell Renda to pump more money
into the operation.
Despite all this regulatory attention being given to Indian Springs State Bank,
bank examiners discovered, Anthony Russo regularly attended bank loan committee
meetings in which bank directors discussed the bank's most important
business—in clear disregard of earlier demands made by regulators that his
activities at the bank be confined to drumming up new business. He exerted significant influence over daily operations at the bank. To make things even
worse, examiners discovered that some of the Civella-related loans were in
default. Those were no ordinary customers and the bank was having a hard time
finding a law firm brave (or foolhardy) enough to try to collect on their loans.
"Law firms wanted no part of those particular cases," one former Indian Springs State Bank official told a reporter.5
This wasn't the kind of "new business" the board of directors had had in mind when they let Lemaster talk them into hiring Russo, and they told Lemaster to fire him. At first Lemaster resisted, but minutes of the June 1983 meeting showed that the board complained bitterly about Russo's alleged mob customers and about the Hawaii loans, which, after all, Russo had brought to the bank. At last Lemaster relented, agreeing to have Russo out by the end of the month.
With all this turmoil in Kansas City, no one was paying any attention to Sam Daily in Hawaii. Lemaster, Winkler, and Renda had their own problems as the scheme began to unwind, and they left Daily to twist in the wind. In desperation. Daily began penning a series of angry letters to Winkler, letters filled with accusations that Winkler and Renda had misled him, cut him out of his share, and left him to face the bank and the straw borrowers alone. Daily demanded that Renda use some of the loan proceeds he'd stockpiled to pay off the straw borrowers loans at Indian Springs State Bank. The response Daily got from his first few letters was silence. He was furious.
"Law firms wanted no part of those particular cases," one former Indian Springs State Bank official told a reporter.5
This wasn't the kind of "new business" the board of directors had had in mind when they let Lemaster talk them into hiring Russo, and they told Lemaster to fire him. At first Lemaster resisted, but minutes of the June 1983 meeting showed that the board complained bitterly about Russo's alleged mob customers and about the Hawaii loans, which, after all, Russo had brought to the bank. At last Lemaster relented, agreeing to have Russo out by the end of the month.
With all this turmoil in Kansas City, no one was paying any attention to Sam Daily in Hawaii. Lemaster, Winkler, and Renda had their own problems as the scheme began to unwind, and they left Daily to twist in the wind. In desperation. Daily began penning a series of angry letters to Winkler, letters filled with accusations that Winkler and Renda had misled him, cut him out of his share, and left him to face the bank and the straw borrowers alone. Daily demanded that Renda use some of the loan proceeds he'd stockpiled to pay off the straw borrowers loans at Indian Springs State Bank. The response Daily got from his first few letters was silence. He was furious.
On the evening of June 16, 1983, Franklin Winkler was relaxing in his Honolulu home when the phone rang. He got up from his easy chair and took
the call. It was Sam Daily. Almost immediately a volley of shots rang through
the house as an assassin, with a clear view of Winkler through the living-room
window, opened fire. Franklin was hit three times, once in the arm, leg, and
hand. No one was ever charged with the attempted murder. But nine days later Renda wrote in his desk diary that Winkler had called to say he suspected Daily:
Sam (Daily) wrote ultimatum letter signed "or else." . . . Franklin didn't want to discuss particulars on phone . . . will meet in NYC Thursday.
Winkler returned to work in his Honolulu office a week later with a cast on
his wrist but otherwise fit. His employees had hoped for a longer convalescence. His office manager, Chuck Downing, wrote in his desk diary on June 23:
F.A.W. back in office for first time since shooting, wearing a cast on his
wrist. My staff worried about going into his office and getting in the way of
the next bullet.
By this time Daily was completely out of money. His wild letters had convinced
Winkler and Renda that he was a real threat to them. He was talking too much. Daily wrote Winkler again, accusing him and Renda of all manner
of underhanded double dealing, outlining his gripes in painful detail. On July 18 Winkler, trying to quiet the volatile Daily, shot off an equally detailed letter addressing Daily's complaints one by one.
Winkler reminded Daily that in 1982 both of them had been in dire financial straits, facing foreclosure on all sides, and that it was he, Winkler, who had come up with a scheme and let Daily in on it.
"Anyway the main point I am trying to make," Winkler wrote, "is that in some form or another we were able to obtain approximately $1,400,000 in cash to both of us in 1982 which amount allowed both you and I to stay in business."
At about the same time, thousands of miles away in Kansas City, William Lemaster's son, a Missouri doctor, began to receive strange phone calls. When he picked up the phone there was only long silence on the other end until the caller finally hung up. His father's white Lincoln Continental was vandalized several times over a two-week period.
"Someone was trying to rattle his cage," Lemaster's son said.
In the early morning hours of July 22, 1983, William Lemaster left a family party to drive home. Shortly thereafter a witness saw Lemaster's Lincoln cross a narrow bridge in Lexington, then suddenly make a wide U-turn at the end of the bridge and speed back across the bridge, heading in the direction from which it had come. When the car reached the end of the bridge it shot forward, as though someone had pushed the accelerator to the floor, leapt a curb, and slammed full speed into the concrete foundation of a roadside war memorial. The car burst into flames, burning the 59-year-old banker's body beyond recognition. What was left of the body, a handful of ashes and bone fragments, was swept up and officially cremated the next morning.
The incident could not have been an accident, according to investigators, but for several reasons it also didn't seem like suicide. When Lemaster had left the family gathering at 2 a.m., he had not given his family any hint that he intended to kill himself five minutes later. He had said no long good-byes, left no notes, made no final arrangements. The man who witnessed the accident said he could not identify Lemaster, or anyone else, as the driver of the Lincoln, so people began to wonder if Lemaster had really been in the car. Or if he had, had he been dead before the accident? they wondered. Maybe he had been drugged. Investigators determined that the fire had begun in the back scat, a place that contained no flammable liquid, a place where car fires seldom start. Further, the fire was a furious one that instantly consumed the entire passenger compartment. The fierce flames left no body to autopsy and made identification of the corpse impossible.
Could it have been murder? some asked. "It's a possibility," the young Lemaster said. "I would guess there were a few who had motives." 6
While Lemaster's problems were over, his associates were left to deal with the fallout from his linked-financing arrangement with Renda. By midsummer 1983 most of the $6 million in Hawaii loans made by Indian Sprmgs State Bank were in deep default and the bank was crawling with FDIC regulators. Over at Coronado Savings, FSLIC auditors had just found the new loans to the Hawaii partnerships, $3.7 million in all, that were also already in default.
In Hawaii, Daily was becoming increasingly frantic . . and noisy. On August 8 Winkler called Renda, who jotted in his desk diary, "Franklin informed me that Sam Daily stole all the office furniture and equipment [from the partnership offices in Hawaii]. "The following week some of the employees in Hawaii were told not to come to work because there was no money to pay them.
On September 6 Franklin Winkler penned a four-page letter to Daily (who was, after all, right there on the Hawaiian island of Oahu with him, merely a local phone call away. But maybe, after the shooting, Winkler didn't take phone calls any longer). Franklin's letter simply said:
I learned that you are using me as a scapegoat to blame all of the wrongdoings on me so that you can exonerate [sic] yourself of any wrongdoings, & create an image of credibility for yourself. . . . Mario is aware of all these items and his only comment was that in the event you visit regularly a psychoanalyst, neither him nor I would have sufficient money to pay for such psychoanalyst to fully complete his cure on you.
On September 14 the FSLIC slapped a cease-and-desist order on Coronado Savings, stopping the thrift from making any future loans to the Hawaii partnerships or renewing the old ones. But regardless of these troubles, Renda and Winkler were reluctant to bid farewell to their beloved scheme, and a month after Coronado was lost to them, Renda's Hawaii office hosted lavish parties for bankers and savings and loan executives attending separate conventions there. It was an opportunity to find some new pigeons, and Renda spent $12,000 on the parties and sent several New York executives with their wives to assist in the grand event. He rented limousines to bring guests to the parties from their hotels. His employees were instructed to explain, if anyone asked, that the office furniture—which had been repossessed days earlier—had been moved out to make room for the party.
But keeping up appearances did nothing but infuriate Sam Daily, who was still trying to get Renda to pay off the Indian Springs loans so the straw borrowers would leave him alone. He did not appreciate having been left to juggle a crumbling empire of over encumbered properties with crushing negative cash flows and a small army of straw borrowers who were just now realizing that they had been had. On November 20, 198?, Daily penned another of his famous letters. This time he tried to get Franklin Winkler on his side by blaming Renda for all the troubles.
Franklin. . . .
I am sick and tired of protecting someone who has destroyed me. My firm intentions are that if Mario Renda refuses to do his part in helping us resolve these problems then I am going to hold a news conference with the Kansas City Business journal and Kansas City Star, and i am going to tell them the whole sordid affair as it concerns First United Fund and Mario Renda. I want you to make Mario Renda well aware that 1 believe he deals with the Mafia and with known hit men. I had his one-eared friend checked out when he arrived in Honolulu, and he was rated as one of the top hit men in the United States. (An investigator told us he heard that Renda had sent Salvatore Piga —who was rumored to have lost a chunk of an ear when it was bitten off in a fight—to Hawaii to discover who shot Winkler. History has not recorded whether or not he was successful.)
In the event Mario Renda thinks that he would like to place a hit on me, I think you should tell him that that would probably not be too wise. I have sent another letter, in my best literate terms, outlining the whole series of events that have occurred as I know them concerning his business dealings and his association with the New York hit man. Should anything happen to me or my family I have three prominent attorneys who have a copy of that letter. Those three prominent attorneys are very good friends of mine. I can assure you that they will see Mario Renda behind bars if anything happens to me. I think he knows that I have the moral responsibility, the moral fortitude, and the pure guts that are necessary to see his company destroyed by revealing to the public the manner in which he carries on his business affairs and his involvement with Indian Springs State Bank.
First United Fund's high-water year was 1983, even though the Kansas City scams were falling apart. Renda's salary in 1982 had been $150,000. In 1983 he voted himself a bonus of $300,000 and in 1984 he would vote himself a bonus of $400,000." First United Fund now had offices in Garden City, New York, in Woodland Hills, California, and in the Grosvenor Center in Honolulu.
But by late 1983 Renda's empire was seriously threatened, not by federal regulators, or by the FBI, or Sam Daily, but by Richard Ringer and Bart Fraust, two reporters working for the century-old newspaper the American Banker. Ringer first dented Renda's armor when he set out to cover the indictment of an East Indian who used Renda's linked deposits to swindle a number of small Midwest banks out of tens of millions of dollars. The American Banker story swept through the financial markets and First United Fund started losing customers right and left. Renda became obsessed with the story' and he filled his desk diary for weeks with increasingly frantic scribbling:
Article in American Banker appeared very negative. Many clients called also negative after article. Prudential Bach will no longer do business or finance with First United. Very Damaging.
A.G. Becker cancelled us out. No more business because of American Banker Article. Contacted FBI for help.
Rumors on the street REALLY BAD. Street filled with rumors. No chance anyone will do business with us now.
Steve called to say Saudi's might not do business with us now.
On August 16, 1983, Renda filed a $90 million lawsuit against the American Banker for libel.8 (Some time later Richard Ringer was jogging after work when a green Mercedes-Benz pulled alongside. Two well-dressed white men stepped from the car, walked up to him, and proceeded to administer a thorough beating. With their work done, they slipped back into the Mercedes and drove away. Neither man said anything to Ringer, but he certainly felt the beating could have been a message from Renda.)
In January 1984 the Kansas state bank commissioner determined Indian Springs State Bank was hopelessly insolvent and closed the bank down. (In December, Anthony Russo had suddenly quit, though he remained a director of the bank's holding company. No doubt he saw what was coming and figured the regulators who took over the bank wouldn't be developing his kind of "new business.") A team of examiners and attorneys moved in and began the tedious process of verifying bookkeeping entries line by line and examining each loan word by word to determine the true financial condition of the institution. The president of the bank, William Lemaster, who presumably would have had information crucial to the FDIC's understanding of what had happened at Indian Springs State Bank, was (reminiscent of Centennial's Erv Hansen) dead.9 Unraveling Indian Springs State Bank was going to be a mess.
On March 26, 1984, the F.H.L.B.B approved the regulation, to go into effect October 1. 3 The period between approval of the regulation in March and its scheduled implementation date in October would prove to be a period of bitter regulatory war. Suddenly stories began to be leaked to the Washington press that Gray was abusing his expense accounts, that he might be under FBI investigation, and that he was a dullard who took hours to make even the simplest decisions. A story circulated that Gray had arranged a conference call with the district bank presidents and kept them all waiting on the line for an hour and a half while he agonized over artwork to be used in an in-house publication. Gray said the story was a complete fabrication.
In March 1984 Representative Doug Barnard (D-Ga.)'' conducted new congressional hearings into the brokered-deposit issue, and the debate was heated. Once again Mario Renda was called to testify. When questioned specifically about his activities, he lied, denying any involvement in linked financing or in any other activities that would contribute to destabilization of financial institutions.
Barnard had submitted written questions to the F.H.L.B.B and the FDIC, and their written responses'5 were a tough, frank indictment of brokered deposits. The regulators complained about linked financing, and they used First United Fund as their key example.6 They also complained that they were afraid the easy money would encourage risk-taking by thrifts looking for quick profits in high risk investments. Gray said thrift failures could cost the FSLIC $2.2 billion (out of a $6 billion to $7 billion reserve) in 1984, more than double the $1 billion loss in 1985, and he was convinced that brokered deposits were an important part of the problem.7
The U.S. League, alarmed by Gray's doom-and-gloom message about the F.S.L.I.G fund, complained that Gray was nothing but a Johnny-One-Note. Such talk could only serve to scare the public away from thrifts, William O'Connell, League president, warned. If Gray didn't keep quiet, he would cause runs on thrifts across the country. In Congress legislation was introduced for the U.S. League that would have effectively gutted Gray's brokered-deposit regulation. Stumping for passage of the bill was the staff director from the Senate Banking and Urban Affairs Committee, Danny Wall. (Wall would replace Gray as F.H.L.B.B chairman in 1987.)
One of Gray's most vocal critics during this lengthy battle was his old friend California S&L Commissioner Larry Taggart, who in March 1984 took the fight into Gray's territory when he traveled to Washington to tell a banking law conference that brokered funds represented 80 percent of the new money pouring into S&Ls. Cutting off that supply, he warned, could do great damage to the institutions. Any abuses related to brokered deposits were not the fault of the brokers, he claimed, but were the fault of S&L managers who used the money improperly.
The deposit brokers weren't going to let Gray put them out of business without a fight. First Atlantic Investment Corporation Securities, Inc. (F.A.I.C) of Miami and the Securities Industry Association sued in federal district court to have Gray's brokered deposit regulation overturned. On June 20, 1984, F.A.I.C won a sweeping victory when federal judge Gerhard Gessell ruled that the broker ban was illegal and that action for such a ban had to come from Congress, not from the Bank Board. (Later F.A.I.C would have the dubious distinction of having brokered the second highest [second to First United Fund] number of deposits into institutions that would later fail.) Gray then suggested Congress give the F.H.L.B.B and the FDIC the authority to impose such a ban, but Congress ignored his request. Danny Wall and members of the Senate and House banking committees breathed a collective sigh of relief. Their high-flying thrift constituents who'd opposed the ban were happy, and presumably their happiness would be reflected in their campaign contributions. Gray's many enemies could finally take pleasure in seeing him publicly humiliated.
Emboldened, the news leaker's 8 picked up momentum. Word spread that Gray would not survive this defeat and was on the way out. In June a story broke in the Washington Post that Gray was under investigation by the FBI for under reporting expenses tied to the renovation of his office. Gray was also being investigated, the Post said, for abusing a $1,500 Bank Board expense account that was .supposed to be used for entertaining Bank Board guests. Gray and his staff had supposedly used the money for staff lunches and cab fares. Gray denied any wrongdoing, pointing out that the lunches were tuna sandwiches he had brought in so he and his people could work late. I'he FBI cleared Gray of these charges, but the summer of 1984 was not a good one for Gray or for his fight to save the thrift industry from itself.[With these reputation assassinations coming from the Post,we know there is CIA involvement with this looting.To what end I cannot speculate,but know with the Post running interference in the investigation,the CIA is involved DC]
Mario Renda had had a tough summer as well. Soon after the Barnard hearings the American Batiker sent a second salvo across Renda's bow (certainly a courageous move for a publication recently sued by Renda for $90 million). It was a lengthy piece headlined "Bank Board Document Lists Money Broker 'Horror Stories'; Abuses Include Questionable Loans in Exchange for Deposits," and it named First United Fund as one of the brokers involved. All hell broke loose. And a second wave of customer defections engulfed First United Fund. Once again Renda's desk diary was peppered with apocalyptic notes:
Account exec's reporting clients are uneasy about doing business with us.
A.G. Becker said no business, cash or otherwise because of the American Banker article. We're out of commercial paper business altogether now—gave us 90 days to clear out.
In May 1984 Franklin Winkler's Bank of Honolulu accounts were seized by the IRS. Apparently Winkler had failed to report something. Then more trouble when the F.H.L.B.B began an internal investigation of linked-financing deals involving deposit brokers and Ed Gray subpoenaed Renda's records. The New York Times ran a piece headlined "Money Broker's Books Subpoenaed," which disclosed that the F.H.L.B.B had subpoenaed First United Fund records to "determine the role it has played in about 20 banking institutions that have failed or are regarded as being in danger of failing."
Renda had responded in advance to the Times reporter's written questions with the following written responses: "We are not 'involved' in bank failures. We are the brokerage house that the greatest number of banks in the U.S. uses. We have quoted rates for over 1,000 banks. If 2 percent, or 20 of those banks, fail, naturally our name stands a good chance of being mentioned in each instance. " Did First United engage in linked financing? "This is absolutely untrue. Neither First United nor any of its subsidiaries have ever borrowed any money whatsoever—nor have any of its officers borrowed any money whatsoever—from any banking institution for which we have quoted rates."
Bank records would later show that Renda was lying. In fact, at that very time he had just teamed up with a Houston-based swindler to pull a linked- financing swindle on Rexford State Bank in Rexford, Kansas. The Rexford State Bank scam was a classic bust-out in which they took out $2 million in loans in about three months and left the small 82-year-old bank insolvent. Why would Renda take the risk of continuing his "special deals" after Indian Springs State Bank was closed, when he must have known regulators were starting to scour Indian Spring's books trying to find out what went wrong?
"Renda felt he had nothing to worry about," said one source close to the FDIC. "He knew that, in those days before everyone wised up, the FDIC and FSLIC would send in two separate teams of auditors when they seized a bank like Indian Springs. One team would only look at the deposit side of the operation and the other the loan side. The two teams of auditors never ever compared notes. So he thought they'd never make a direct connection between First United Fund deposits and the Hawaii loans."
Renda was still brokering an enormous amount of deposits, and personal financial statements showed that by 1984 he was a very wealthy man. He surrounded himself and First United Fund with the trappings of success, including a $1.2 million BAC-111, an 80-seat jet that had been converted to a luxury corporate floor plan.9 Renda already had purchased a $69,000 Rolls-Royce Silver Spirit and bought a second. To keep his wife, Antoinette, happy, he invested in a little jewelry, two rings worth $306,000 (a platinum ring with a 10.5-carat pear-shaped diamond and two baquettes, and an 18-carat gold ring with a 17.35- carat emerald-cut diamond and two triangular diamonds). For his desk nothing would do but a $1,100 silver inkwell and a $1,150 silver cigar box with two matching silver liquor canisters. For balance there was the $6,050 English silver tea and coffee service. Underfoot a $26, 500 Kerman rug, a $7,000 Ant Bahktiari rug, and a $6,000 Tabriz rug. He finally had the Khashoggi life-style he had coveted.
As we unfolded the Renda story we began to wonder how many banks and thrifts Renda had infected and how many had succumbed.10 We soon found out that no one had any idea. In October 1988, from a confidential source close to the Federal Reserve Bank, we did get a partial list of institutions known to have been used by Renda. There were 160 banks and thrifts on the list, scattered from coast to coast and even in Puerto Rico, and 104 had already failed. It became clear to us that the damage Mario Renda had done and was doing to thrifts and banks would be years in the unfolding.
In early 1984 the Indian Springs State Bank and Coronado Savings and Loan receivership's continued to try to figure out who owed what to whom at the two failed institutions. The FDIC and the FSLIC in Washington hired the Kansas City law firm of Morrison, Hecker, Curtis, Kuder & Parrish to handle some of the legal work, and one of the attorneys they assigned to settle some of the bank's problem loans was Michael Manning. Manning was a principled, hardworking Kansas lawyer in his mid-thirties. With no premonition that this would be anything but a routine bank ease. Manning began as usual by dividing up the bank's problem loans with other attorneys in the firm. By pure chance he ended up with most of the Hawaii loans in his stack. When he looked over what he thought were about 30 simple collection cases, he was first puzzled that a small, landlocked bank in America's heartland would have loaned so much money on Hawaii real estate projects. A bank examiner shared Manning's puzzlement: "What in the world was a fly-shit bank in the basement of a shopping center in a suburb in Kansas City, Kansas, doing making these kinds of loans?" (The bank wasn't actually in the basement, but it was partially underground.)
One night Manning stayed late at his office and spread the loan files out on a table to study them together. He immediately spotted startling similarities. He noticed, for example, that many of the borrowers said they intended to use their loan to invest in the same limited partnerships. These were the same similarities that had driven bank examiners months earlier to determine that the many separate loans to the Hawaii partnerships were really part of one big loan. But the examiners had not pursued that insight beyond the point of demanding that Lemaster clean up the loans. If they had, they might have nipped Renda's scheme in the bud, thus saving dozens of financial institutions from Indian Springs' fate. Now Manning had picked up where the bank examiners had left off. He didn't know what the unifying factor was yet, but these were not unrelated loans. He decided to fly immediately to Hawaii to ask these borrowers some questions.
He took 30 depositions, in about that many days, from the Franklin Winkler Sam Daily straw borrowers in Hawaii. Getting straight answers out of them was tough at first. They believed, the borrowers said over and over, that they were not responsible for repaying the loans. Winkler and Daily were, they said. The straw borrowers had broken federal law by allowing their names to be used on fraudulent loan statements, but they claimed they were as much victims as the FDIC and FSLIC.
From those depositions emerged a fuzzy picture of only the Hawaiian end of the operation. But Franklin Winkler and Sam Daily were clearly implicated in some larger scheme. Some of the borrowers mentioned someone in New York named Mario Renda. And the borrowers had bits and pieces of information concerning similar deals in other places like Texas and Los Angeles, but how those events tied together was still unclear. What Manning did know for certain was that he had stumbled upon an enterprise that reached far beyond his stack of 30 defaulted loans.
One Hawaii borrower realized immediately that Manning's questions were leading somewhere other than to a simple resolution of some overdue loans. He dug in his heels and took the fifth amendment 52 times during Manning's deposition. Ironically , the questions he refused to answer clued Manning in to the sensitive areas. Manning also deposed Franklin Winkler. Charming and friendly as usual, Winkler nevertheless took the fifth amendment to every question Manning asked him—even his name—for three days.
Manning went home to Kansas City more convinced than ever that he was onto something important. He began to keep a daily diary of clues, often isolated notes that made little sense but "seemed" important. The case was beginning to consume him. It was on his mind all the time. What had been going on at Indian Springs State Bank? It seemed to be bigger than Franklin Winkler and Sam Daily, somehow. Other states were involved, the borrowers had said. Were other banks in danger? he wondered. How widespread was this enterprise? Manning spent his days, nights, and weekends trying to piece together the answers to the puzzle.
Finally, after weeks of struggling with his conscience, the straw borrower who had taken the fifth 52 times phoned Manning and said he wanted to talk. He then exposed Mario Renda's key role in the scheme. There was a deposit broker in New York, he said, who had made "courtesy deposits" at Indian Springs State Bank. In turn, the bank loaned money to straw borrowers who gave the money to Franklin Winkler, Daily, and Renda and companies and limited partnerships they controlled. Manning realized now that he was dealing with a sophisticated form of linked financing, structured through a maze of interlocking partnerships and companies until it became almost impossible to detect. Who knew how many other banks and thrifts might have also been victims, he thought.
Though hired by the regulators 11 to pursue civil actions against those who owed money to Indian Springs State Bank and Coronado Savings, Manning felt he now had absolute evidence of criminal bank fraud (admissions from the straw borrowers) and he convinced Kansas City FBI Agent Ed Leon of his case. Leon, and later Manning, took this evidence to an assistant U.S. attorney in Kansas City, Kansas, expecting that she would immediately open an investigation. Instead they ran head-on into the frustrating realities of white-collar crime prosecution in America. She was not interested in his case, she told Manning. It would take too long to "turn." Her office's resources were limited. The Department of Justice demanded visible results, tangible statistics—indictments and convictions, and lots of them. Bank fraud cases took years to unravel. Thanks, but no thanks. Incredulous, Manning next carried his evidence to the Organized Crime Strike Force in Kansas City, where he got the same cold shoulder.
Manning reported his findings to Christopher "Kip" Byrne, senior trial attorney for the FDIC in Washington. Byrne had supervised Manning's pursuit of the Hawaii straw borrowers and shared his concerns about the strange nature of those loans. He had also heard of Mario Renda because of the periodic squabbling in Washington about the role of deposit brokers in bank failures since the collapse of Penn Square Bank in Oklahoma in 1982. Still, no one in the Justice Department would move on Manning's information.
Then, in September 1984, Manning got a break. Six of Renda's bullpen brokers and Renda's personal secretary decided to break with Renda and start their own deposit brokerage firm. This resulted in a messy legal battle because, before hiring them, Renda had secured a pledge that they would not go into competition with him. So when they struck out on their own, Renda sued. The seven former employees later explained that they had read the American Banker articles about Renda, and one of them went to Washington to try to dig up some dirt on their old boss to further their side of the case. Byrne's name had appeared in the American Banker stories about Renda, so the former First United broker looked him up and offered to trade information. Was Byrne interested? Absolutely. It looked like Manning finally was going to get the inside scoop on First United Fund. But on the heels of the first meeting, just when Manning and Byrne were so close to Renda they could smell him, the seven former Renda employees settled with Renda and lost interest in their deal with Manning and Byrne.
The letdown was intense. To be so close and then to have Renda slip away, it was too much. Manning was beside himself. Questions plagued him: How big was Renda's operation? How many banks were at risk? The congressional hearings, the newspaper stories, all warned of the dangers of brokered deposits. Yet here was Manning, with tangible evidence of possible wrongdoing by one of the country's biggest deposit brokers, and he was being thwarted at every turn. It was crazy. So Manning took off the gloves and played a little hard ball. He went back to the six brokers and Renda's former secretary—"The Seven Dwarfs" he now called them. He threatened, he promised, he cajoled, he pleaded, and he threatened again. Finally it worked.
Their attorneys agreed to let Manning depose them, and he and Byrne rushed to New York before the Dwarfs could back out. Over four days, from dawn to late into the night, they took testimony. And when they were finished they had collected sworn testimony alleging labor racketeering, pension fraud, wire fraud, tax fraud, mail fraud, and bank fraud involving Renda, Winkler, Daily, and others. Never in Manning's wildest imaginings had he guessed he'd walked into a criminal enterprise of such breadth, such stunning magnitude. Not one of the rebel brokers had all the details of the operation, but when combined, their testimony was devastating—and the implications for the bank and thrift industries, terrifying.
On the third day of the interrogation Manning learned from a confidential source that Sal Piga had phoned Renda to say, "The Seven Dwarfs are talking to the FDIC." Manning told us later it was unnerving, to say the least, to have Piga use Manning's own nickname for the brokers. The nickname was an in-house joke at Manning's office in Kansas. How had Piga. in New York, learned of the term? Was one of the Dwarfs a plant? Were Manning's phones or offices bugged? What else did Piga know? Later, when two FBI agents went to the home of one of the Dwarfs to ask some questions, they found themselves staring down the barrel of a shotgun. The Dwarf had feared that the agents were Renda's men.
The sworn testimony Manning and Byrne had taken from the Seven Dwarfs was valuable and important, but by itself it could not carry the case. They needed documents, written proof from the files of First United Fund itself. But during the depositions the Dwarfs were adamant. No, they would not provide documents. That would be really pushing their luck. They were afraid. Manning and Byrne expected too much. Their lives were in danger, it was too much to ask. But just when Manning was about to give up, someone on the inside at First United Fund suddenly, and without explanation, produced the "smoking guns" Manning needed.12
Manning, on his way to catch a plane home to Kansas, pulled into a dark airport parking lot. He walked around to the back of the car and opened the trunk to take out his suitcase. There, in the trunk, was a fat stack of First United Fund documents. How they had gotten there Manning would never say. If he suspected anyone in particular, he knew it would be foolhardy and dangerous to speculate out loud. In ten days that silent stack of documents would collapse Renda's world.
Manning knew they had to move fast. Renda was no doubt prepared to take steps to protect himself if he learned they were getting close. Byrne took the evidence to Organized Crime Strike Force attorneys in Washington. They listened and sent Bryne and Manning and their evidence to the Brooklyn Organized Crime Strike Force, saying that Brooklyn Strike Force attorneys might have an interest in the case. They did. First United had come up in connection with an ongoing investigation the strike force was conducting into racketeering by the Lucchese crime family. Through the use of wire taps and bugs approved to investigate the suspected mob bribery of Teamster officials at Kennedy Airport, investigators had picked up an alleged mobster 13 talking about how Schwimmer, First United Fund's financial consultant, was helping him launder money through bearer bonds.14
The name First United Fund, therefore, got their immediate interest. "They were willing to spend the cerebral energy to understand the case," Manning told us later, and he spent the next ten days with them going over the details. Tough, straight-talking Assistant U.S. Attorney Bruce Maffeo (ironically pronounced like Mafia, with an "o": Mafio) picked up immediately on the importance of the case.
Now they needed to obtain a search warrant for a raid on First United Fund offices. Any documents still there had to be secured before Renda had a chance to remove or destroy them. But someone had to sign an affidavit setting forth the legal grounds on which they wanted to execute the search warrant. Manning was the obvious choice, since he was the one with the evidence against Renda, but Manning was working for the FDIC and had to have their approval for such a drastic action. The affidavit would contain slanderous allegations about the man who ran one of the largest brokerage firms in the United States. No, the execution of a search warrant by Manning, a representative of the FDIC, was out of the question, regulators said. At that point Kip Byrne, apparently outraged by the regulators' refusal, intervened. "Permit Manning to sign that search warrant or you can take my job and shove it," he said, in so many words. This was absolutely insane, he fumed. Was Mario Renda untouchable?
Voices don't often get raised at the FDIC and such an outburst by their own senior trial attorney shocked the stodgy regulators into reluctant action. They acceded to his demand ... he just better be right. Ten days after Manning had found the First United Fund documents in the trunk of his car, Maffeo's troops, 30 FBI and IRS agents, assaulted the First United Fund offices at 1001 Franklin Avenue in Garden City, New York, with the search warrant in hand. Manning and Maffeo had been tipped that Renda was attending an all-day conference and would be out of the office—it seemed like a good day to go calling. For the next two days they filled box after box with First United Fund's books, records, files, and even personal notes. Six days later agents raided Franklin Winkler's company in Honolulu, hauling another 100 boxes of files off to Maffeo in New York.
For both Manning's civil case and Maffeo's criminal racketeering investigation, the haul was a windfall. Among the booty investigators found some revealing items—some deadly serious, some humorous. There were verses to a tongue-in-check song written for Renda by a First United employee. "The Twelve Days of Bilking," which was sung to the tune of "The Twelve Days of Christmas, " outlined, stanza by stanza, how brokered deposits were used to con banks and thrifts. The last stanza referred to such things as "banks a-failing," "accountants auditing," "checks a-bouncing," "cops arresting," and "Steve Black hanging from a tree."16
Another song penned by Renda employees was entitled "Bilkers in the Night," sung to the tune of "Strangers in the Night."
The songs were amusing. A lot less amusing was evidence that Renda had used First United Fund as a giant Trojan horse that had been granted entry into dozens of banks and thrifts across the United States. A lot of the names of institutions where the Seven Dwarfs had said Renda had special deals going were found in the records seized at First United Fund:
Mission Bank, Mission. Kansas
Coronado Federal Savings and Loan, Kansas City. Kansas
The Metropolitan Bank. Kansas City,
Missouri Metro North Bank, Kansas City, Missouri
First Federal Savings and Loan. Beloit. Kansas
Farmers and Merchants Bank, Huntsville, Missouri
Rexford State Bank, Rexford, Kansas
Metropolitan Bank and Trust, Tampa, Florida
American City Bank, Los Angeles, California
Newport Harbor National Bank, Newport Beach, California
Sparta Sanders State Bank, Sparta, Kentucky
Community Bank, Hartford, South Dakota
Western National Bank of Lovell, Lovell, Wyoming
Emerald Empire Banking Company, Springfield, Oregon
Knickerbocker Federal Savings and Loan, New York, New York
State Savings and Loan, Clovis, New Mexico
Valley First Federal Savings and Loan, Van Nuys, California
Indian Springs State Bank, Kansas City,
Kansas First National Bank of Midland, Midland, Texas
The Teamster and Steelworker pension funds that Renda and his partner Schwimmer skimmed from were deposited at:
First Savings and Loan of Suffolk, Suffolk, Virginia
Westwood Savings and Loan, Los Angeles, California
North Mississippi Savings and Loan, Oxford, Mississippi
Old Court Savings and Loan Association, Baltimore, Maryland
First Progressive Savings and Loan, Westminster, Maryland
Sharon Savings and Loan, Baltimore, Maryland
First Border City Savings and Loan Association, Piqua, Ohio
Bank of San Diego, San Diego, California
Central Illinois Savings and Loan, Virden, Illinois
Montana Savings and Loan, Kalispell, Montana
Virginia Beach Federal Savings and Loan, Richmond, Virginia
Heritage Savings and Loan, Richmond,
Virginia Comstock Bank, Carson City, Nevada
Investors Savings and Loan, Richmond, Virginia
Standard Savings Association, Houston, Texas
Alliance Federal Savings and Loan, Kenner, Louisiana
Valley First Federal Savings and Loan, El Centro, California
Mainland Savings Association, Houston, Texas 16
It was a long list and Manning couldn't even be sure it was complete. What investigators did notice was that more than just a few of the institutions listed also appeared on the FDIC and FSLIC's growing casualty lists. In fact, from January 1982 through June 30, 1985, First United Fund was number one in the nation in brokering deposits into banks that later failed, 28 in all, even though in 1985 it was only thirteenth in the nation in volume of deposits placed.17 In comparison, Merrill Lynch, which brokered nearly 30 times the volume of deposits, brokered into only two institutions that closed.18
It appeared that Renda had supplied money to nearly all the go-go thrifts in the country.
By late in 1984 Sam Daily was all too aware that Renda and Winkler had left him to take the rap. Increasingly paranoid, he was certain they were trying to frame him. (He would eventually be convicted of conspiracy in the scam.) In an apparent attempt to short-circuit such a plot. Daily shot off two pages of his famous prose to the Honolulu police:
Dear Officer,
If you check your files you will find that some time about a year and a half ago, someone tried to put Mr. Winkler's lights out. Fortunately for Mr. Winkler they failed. . . .
After a rambling discourse outlining the troubles he'd seen, Daily finally got to the point:
To that end, I am asking you to investigate this matter so that should one of Franklin Winkler's numerous enemies eliminate his fat body from the face of our good earth. I will not be the suspect.
A month later Daily sent Winkler a letter that unquestionably outdid all his earlier literary efforts. This letter, which exposed Daily as an anti-Semite (the letter was referred to by investigators simply as "the fat, slimy hymie letter") also showed the stress Daily was under:
Franklin:
I just received your letter. It's really not worth commenting on, except to say that I had a friend and client, who is a criminal psychologist, review your letter.
My friend is a Jew, and specializes in studying the behavior of the criminally insane and mentally ill Jew, under a grant funded by the Nation of Israel. The purpose of the grant is to identify Jewish individuals who degrade, by actions and deeds, the standards to which the true Jew adheres.
He said the writer of the letter was obviously a psycho, and probably a fat. slimy, hymie and scared as hell.
I said to my friend, "what is a hymie?" He replied: "Unfortunately, Sam, regardless of the high standards to which a group, such as us Jews subscribe, there is always that minority who degrade the rest of us. They are present in your Protestant Group, in the Catholic Religion, and in all other religious and ethnic groups as well. The most demented of the group, to which the author of the letter under discussion obviously belongs, is referred to by other Jews as a hymie. I believe the word first appeared in the 1920 dictionary of the underworld, published in New York."
I congratulated him on his accuracy, and in our conversation he asked me, "Why is the fat, slimy, hymie so scared?" I replied; "my friend, if you had done all of the following in three short years, what would your emotional feelings be." . . .
He may have framed [names deleted] and others into a murder for hire plot. ...
He was a major factor in Bill Lemaster, President of Indian Springs State Bank, committing suicide, or, "whatever," ...
He stole some $800,000,00 from First United Partners Four, with some 10 Partners, all of whom are mad as hell.
He and an associate made a phone offer to buy a bank to incite the bank into making loans which, in part, caused the failure of the bank, and an alleged loss of $5,000,000.00 to the shareholders of the bank, [Indian Springs) ...
He is being investigated by the FBI on numerous accounts, . . .
He has over 130 lawsuits pending in Honolulu alone, and He stole in excess of $500,000.00 from me.
The criminal psychologist interrupted me. "Sam," he said, "I understand the SOB IS a fat. slimy, hymie, crook who has taken some $3,000,000.00 from some 50 odd investors in three short years [a reference to Daily's straw borrowers], and that he is probably going to prison, but that doesn't explain why he is so damned scared."
I replied; "my friend, I spent my time in Korea, Vietnam, Thailand, Laos, and other parts of Southeast Asia. I have seen literally dozens of good men die. Some died bravely, most prayed, a few begged; all were scared. But in all of my experiences, I have never seen anyone so afraid of death as Franklin Winkler. I think the answer is simple. The men I have seen die had a cause that involved someone else; that is to say "Duty, Flag, Country, Family, or Friends. " They had feeling for others; a sense of loyalty, honesty, truthfulness, and fairness to those with whom they dealt. Franklin Winkler has only himself and his Dad, who has one foot in the grave and one foot on a banana peel. He loves no one, and in turn, no one loves him. He has no God. He has only greed. "
The criminal psychologist said, "Oh, now I understand. It is as plain as day. He is a fucking fat, slimy, hymie."
Franklin, if I were you, I'd be scared as hell, too. You've screwed over 50 families, ruined them. When you consider that probably 25% of our population, on a random basis, are nuts, there's probably at least 25% of 50 families out there who are capable of spilling your guts and your nuts on the paking [sic] ramp floor, or in the alternative, putting a .38 slug thru your demented brain.
Mind you, I have no interest in inflicting physical harm to your fat, slimy, hymie body. I'd rather hand you a bar of soap or a jar of Vaseline as you walk into Leavenworth [prison], and watch those big mean studs, there for violent crimes, line up to screw your fat, slimy, hymie ass.
Have a good day Franklin,
Winkler reminded Daily that in 1982 both of them had been in dire financial straits, facing foreclosure on all sides, and that it was he, Winkler, who had come up with a scheme and let Daily in on it.
"Anyway the main point I am trying to make," Winkler wrote, "is that in some form or another we were able to obtain approximately $1,400,000 in cash to both of us in 1982 which amount allowed both you and I to stay in business."
At about the same time, thousands of miles away in Kansas City, William Lemaster's son, a Missouri doctor, began to receive strange phone calls. When he picked up the phone there was only long silence on the other end until the caller finally hung up. His father's white Lincoln Continental was vandalized several times over a two-week period.
"Someone was trying to rattle his cage," Lemaster's son said.
In the early morning hours of July 22, 1983, William Lemaster left a family party to drive home. Shortly thereafter a witness saw Lemaster's Lincoln cross a narrow bridge in Lexington, then suddenly make a wide U-turn at the end of the bridge and speed back across the bridge, heading in the direction from which it had come. When the car reached the end of the bridge it shot forward, as though someone had pushed the accelerator to the floor, leapt a curb, and slammed full speed into the concrete foundation of a roadside war memorial. The car burst into flames, burning the 59-year-old banker's body beyond recognition. What was left of the body, a handful of ashes and bone fragments, was swept up and officially cremated the next morning.
The incident could not have been an accident, according to investigators, but for several reasons it also didn't seem like suicide. When Lemaster had left the family gathering at 2 a.m., he had not given his family any hint that he intended to kill himself five minutes later. He had said no long good-byes, left no notes, made no final arrangements. The man who witnessed the accident said he could not identify Lemaster, or anyone else, as the driver of the Lincoln, so people began to wonder if Lemaster had really been in the car. Or if he had, had he been dead before the accident? they wondered. Maybe he had been drugged. Investigators determined that the fire had begun in the back scat, a place that contained no flammable liquid, a place where car fires seldom start. Further, the fire was a furious one that instantly consumed the entire passenger compartment. The fierce flames left no body to autopsy and made identification of the corpse impossible.
Could it have been murder? some asked. "It's a possibility," the young Lemaster said. "I would guess there were a few who had motives." 6
While Lemaster's problems were over, his associates were left to deal with the fallout from his linked-financing arrangement with Renda. By midsummer 1983 most of the $6 million in Hawaii loans made by Indian Sprmgs State Bank were in deep default and the bank was crawling with FDIC regulators. Over at Coronado Savings, FSLIC auditors had just found the new loans to the Hawaii partnerships, $3.7 million in all, that were also already in default.
In Hawaii, Daily was becoming increasingly frantic . . and noisy. On August 8 Winkler called Renda, who jotted in his desk diary, "Franklin informed me that Sam Daily stole all the office furniture and equipment [from the partnership offices in Hawaii]. "The following week some of the employees in Hawaii were told not to come to work because there was no money to pay them.
On September 6 Franklin Winkler penned a four-page letter to Daily (who was, after all, right there on the Hawaiian island of Oahu with him, merely a local phone call away. But maybe, after the shooting, Winkler didn't take phone calls any longer). Franklin's letter simply said:
I learned that you are using me as a scapegoat to blame all of the wrongdoings on me so that you can exonerate [sic] yourself of any wrongdoings, & create an image of credibility for yourself. . . . Mario is aware of all these items and his only comment was that in the event you visit regularly a psychoanalyst, neither him nor I would have sufficient money to pay for such psychoanalyst to fully complete his cure on you.
On September 14 the FSLIC slapped a cease-and-desist order on Coronado Savings, stopping the thrift from making any future loans to the Hawaii partnerships or renewing the old ones. But regardless of these troubles, Renda and Winkler were reluctant to bid farewell to their beloved scheme, and a month after Coronado was lost to them, Renda's Hawaii office hosted lavish parties for bankers and savings and loan executives attending separate conventions there. It was an opportunity to find some new pigeons, and Renda spent $12,000 on the parties and sent several New York executives with their wives to assist in the grand event. He rented limousines to bring guests to the parties from their hotels. His employees were instructed to explain, if anyone asked, that the office furniture—which had been repossessed days earlier—had been moved out to make room for the party.
But keeping up appearances did nothing but infuriate Sam Daily, who was still trying to get Renda to pay off the Indian Springs loans so the straw borrowers would leave him alone. He did not appreciate having been left to juggle a crumbling empire of over encumbered properties with crushing negative cash flows and a small army of straw borrowers who were just now realizing that they had been had. On November 20, 198?, Daily penned another of his famous letters. This time he tried to get Franklin Winkler on his side by blaming Renda for all the troubles.
Franklin. . . .
I am sick and tired of protecting someone who has destroyed me. My firm intentions are that if Mario Renda refuses to do his part in helping us resolve these problems then I am going to hold a news conference with the Kansas City Business journal and Kansas City Star, and i am going to tell them the whole sordid affair as it concerns First United Fund and Mario Renda. I want you to make Mario Renda well aware that 1 believe he deals with the Mafia and with known hit men. I had his one-eared friend checked out when he arrived in Honolulu, and he was rated as one of the top hit men in the United States. (An investigator told us he heard that Renda had sent Salvatore Piga —who was rumored to have lost a chunk of an ear when it was bitten off in a fight—to Hawaii to discover who shot Winkler. History has not recorded whether or not he was successful.)
In the event Mario Renda thinks that he would like to place a hit on me, I think you should tell him that that would probably not be too wise. I have sent another letter, in my best literate terms, outlining the whole series of events that have occurred as I know them concerning his business dealings and his association with the New York hit man. Should anything happen to me or my family I have three prominent attorneys who have a copy of that letter. Those three prominent attorneys are very good friends of mine. I can assure you that they will see Mario Renda behind bars if anything happens to me. I think he knows that I have the moral responsibility, the moral fortitude, and the pure guts that are necessary to see his company destroyed by revealing to the public the manner in which he carries on his business affairs and his involvement with Indian Springs State Bank.
First United Fund's high-water year was 1983, even though the Kansas City scams were falling apart. Renda's salary in 1982 had been $150,000. In 1983 he voted himself a bonus of $300,000 and in 1984 he would vote himself a bonus of $400,000." First United Fund now had offices in Garden City, New York, in Woodland Hills, California, and in the Grosvenor Center in Honolulu.
But by late 1983 Renda's empire was seriously threatened, not by federal regulators, or by the FBI, or Sam Daily, but by Richard Ringer and Bart Fraust, two reporters working for the century-old newspaper the American Banker. Ringer first dented Renda's armor when he set out to cover the indictment of an East Indian who used Renda's linked deposits to swindle a number of small Midwest banks out of tens of millions of dollars. The American Banker story swept through the financial markets and First United Fund started losing customers right and left. Renda became obsessed with the story' and he filled his desk diary for weeks with increasingly frantic scribbling:
Article in American Banker appeared very negative. Many clients called also negative after article. Prudential Bach will no longer do business or finance with First United. Very Damaging.
A.G. Becker cancelled us out. No more business because of American Banker Article. Contacted FBI for help.
Rumors on the street REALLY BAD. Street filled with rumors. No chance anyone will do business with us now.
Steve called to say Saudi's might not do business with us now.
On August 16, 1983, Renda filed a $90 million lawsuit against the American Banker for libel.8 (Some time later Richard Ringer was jogging after work when a green Mercedes-Benz pulled alongside. Two well-dressed white men stepped from the car, walked up to him, and proceeded to administer a thorough beating. With their work done, they slipped back into the Mercedes and drove away. Neither man said anything to Ringer, but he certainly felt the beating could have been a message from Renda.)
In January 1984 the Kansas state bank commissioner determined Indian Springs State Bank was hopelessly insolvent and closed the bank down. (In December, Anthony Russo had suddenly quit, though he remained a director of the bank's holding company. No doubt he saw what was coming and figured the regulators who took over the bank wouldn't be developing his kind of "new business.") A team of examiners and attorneys moved in and began the tedious process of verifying bookkeeping entries line by line and examining each loan word by word to determine the true financial condition of the institution. The president of the bank, William Lemaster, who presumably would have had information crucial to the FDIC's understanding of what had happened at Indian Springs State Bank, was (reminiscent of Centennial's Erv Hansen) dead.9 Unraveling Indian Springs State Bank was going to be a mess.
CHAPTER TEN
Renda Meets the
Lawyer
from Kansas
In Washington, Ed Gray had been working for months on his regulation that would deny FSLIC coverage to brokered deposits. He got the support of Bill
Isaac, chairman of the FDIC,1 and then he had to convince his fellow F.H.L.B.B
members of the importance of the move. He had powerful statistics to make his
point: use of brokered deposits was increasing at a frightening rate, from $3
billion industry-wide at the end of 1981 to an estimated $29 billion at the end
of 1983.2
On March 26, 1984, the F.H.L.B.B approved the regulation, to go into effect October 1. 3 The period between approval of the regulation in March and its scheduled implementation date in October would prove to be a period of bitter regulatory war. Suddenly stories began to be leaked to the Washington press that Gray was abusing his expense accounts, that he might be under FBI investigation, and that he was a dullard who took hours to make even the simplest decisions. A story circulated that Gray had arranged a conference call with the district bank presidents and kept them all waiting on the line for an hour and a half while he agonized over artwork to be used in an in-house publication. Gray said the story was a complete fabrication.
In March 1984 Representative Doug Barnard (D-Ga.)'' conducted new congressional hearings into the brokered-deposit issue, and the debate was heated. Once again Mario Renda was called to testify. When questioned specifically about his activities, he lied, denying any involvement in linked financing or in any other activities that would contribute to destabilization of financial institutions.
Barnard had submitted written questions to the F.H.L.B.B and the FDIC, and their written responses'5 were a tough, frank indictment of brokered deposits. The regulators complained about linked financing, and they used First United Fund as their key example.6 They also complained that they were afraid the easy money would encourage risk-taking by thrifts looking for quick profits in high risk investments. Gray said thrift failures could cost the FSLIC $2.2 billion (out of a $6 billion to $7 billion reserve) in 1984, more than double the $1 billion loss in 1985, and he was convinced that brokered deposits were an important part of the problem.7
The U.S. League, alarmed by Gray's doom-and-gloom message about the F.S.L.I.G fund, complained that Gray was nothing but a Johnny-One-Note. Such talk could only serve to scare the public away from thrifts, William O'Connell, League president, warned. If Gray didn't keep quiet, he would cause runs on thrifts across the country. In Congress legislation was introduced for the U.S. League that would have effectively gutted Gray's brokered-deposit regulation. Stumping for passage of the bill was the staff director from the Senate Banking and Urban Affairs Committee, Danny Wall. (Wall would replace Gray as F.H.L.B.B chairman in 1987.)
One of Gray's most vocal critics during this lengthy battle was his old friend California S&L Commissioner Larry Taggart, who in March 1984 took the fight into Gray's territory when he traveled to Washington to tell a banking law conference that brokered funds represented 80 percent of the new money pouring into S&Ls. Cutting off that supply, he warned, could do great damage to the institutions. Any abuses related to brokered deposits were not the fault of the brokers, he claimed, but were the fault of S&L managers who used the money improperly.
The deposit brokers weren't going to let Gray put them out of business without a fight. First Atlantic Investment Corporation Securities, Inc. (F.A.I.C) of Miami and the Securities Industry Association sued in federal district court to have Gray's brokered deposit regulation overturned. On June 20, 1984, F.A.I.C won a sweeping victory when federal judge Gerhard Gessell ruled that the broker ban was illegal and that action for such a ban had to come from Congress, not from the Bank Board. (Later F.A.I.C would have the dubious distinction of having brokered the second highest [second to First United Fund] number of deposits into institutions that would later fail.) Gray then suggested Congress give the F.H.L.B.B and the FDIC the authority to impose such a ban, but Congress ignored his request. Danny Wall and members of the Senate and House banking committees breathed a collective sigh of relief. Their high-flying thrift constituents who'd opposed the ban were happy, and presumably their happiness would be reflected in their campaign contributions. Gray's many enemies could finally take pleasure in seeing him publicly humiliated.
Emboldened, the news leaker's 8 picked up momentum. Word spread that Gray would not survive this defeat and was on the way out. In June a story broke in the Washington Post that Gray was under investigation by the FBI for under reporting expenses tied to the renovation of his office. Gray was also being investigated, the Post said, for abusing a $1,500 Bank Board expense account that was .supposed to be used for entertaining Bank Board guests. Gray and his staff had supposedly used the money for staff lunches and cab fares. Gray denied any wrongdoing, pointing out that the lunches were tuna sandwiches he had brought in so he and his people could work late. I'he FBI cleared Gray of these charges, but the summer of 1984 was not a good one for Gray or for his fight to save the thrift industry from itself.[With these reputation assassinations coming from the Post,we know there is CIA involvement with this looting.To what end I cannot speculate,but know with the Post running interference in the investigation,the CIA is involved DC]
Mario Renda had had a tough summer as well. Soon after the Barnard hearings the American Batiker sent a second salvo across Renda's bow (certainly a courageous move for a publication recently sued by Renda for $90 million). It was a lengthy piece headlined "Bank Board Document Lists Money Broker 'Horror Stories'; Abuses Include Questionable Loans in Exchange for Deposits," and it named First United Fund as one of the brokers involved. All hell broke loose. And a second wave of customer defections engulfed First United Fund. Once again Renda's desk diary was peppered with apocalyptic notes:
Account exec's reporting clients are uneasy about doing business with us.
A.G. Becker said no business, cash or otherwise because of the American Banker article. We're out of commercial paper business altogether now—gave us 90 days to clear out.
In May 1984 Franklin Winkler's Bank of Honolulu accounts were seized by the IRS. Apparently Winkler had failed to report something. Then more trouble when the F.H.L.B.B began an internal investigation of linked-financing deals involving deposit brokers and Ed Gray subpoenaed Renda's records. The New York Times ran a piece headlined "Money Broker's Books Subpoenaed," which disclosed that the F.H.L.B.B had subpoenaed First United Fund records to "determine the role it has played in about 20 banking institutions that have failed or are regarded as being in danger of failing."
Renda had responded in advance to the Times reporter's written questions with the following written responses: "We are not 'involved' in bank failures. We are the brokerage house that the greatest number of banks in the U.S. uses. We have quoted rates for over 1,000 banks. If 2 percent, or 20 of those banks, fail, naturally our name stands a good chance of being mentioned in each instance. " Did First United engage in linked financing? "This is absolutely untrue. Neither First United nor any of its subsidiaries have ever borrowed any money whatsoever—nor have any of its officers borrowed any money whatsoever—from any banking institution for which we have quoted rates."
Bank records would later show that Renda was lying. In fact, at that very time he had just teamed up with a Houston-based swindler to pull a linked- financing swindle on Rexford State Bank in Rexford, Kansas. The Rexford State Bank scam was a classic bust-out in which they took out $2 million in loans in about three months and left the small 82-year-old bank insolvent. Why would Renda take the risk of continuing his "special deals" after Indian Springs State Bank was closed, when he must have known regulators were starting to scour Indian Spring's books trying to find out what went wrong?
"Renda felt he had nothing to worry about," said one source close to the FDIC. "He knew that, in those days before everyone wised up, the FDIC and FSLIC would send in two separate teams of auditors when they seized a bank like Indian Springs. One team would only look at the deposit side of the operation and the other the loan side. The two teams of auditors never ever compared notes. So he thought they'd never make a direct connection between First United Fund deposits and the Hawaii loans."
Renda was still brokering an enormous amount of deposits, and personal financial statements showed that by 1984 he was a very wealthy man. He surrounded himself and First United Fund with the trappings of success, including a $1.2 million BAC-111, an 80-seat jet that had been converted to a luxury corporate floor plan.9 Renda already had purchased a $69,000 Rolls-Royce Silver Spirit and bought a second. To keep his wife, Antoinette, happy, he invested in a little jewelry, two rings worth $306,000 (a platinum ring with a 10.5-carat pear-shaped diamond and two baquettes, and an 18-carat gold ring with a 17.35- carat emerald-cut diamond and two triangular diamonds). For his desk nothing would do but a $1,100 silver inkwell and a $1,150 silver cigar box with two matching silver liquor canisters. For balance there was the $6,050 English silver tea and coffee service. Underfoot a $26, 500 Kerman rug, a $7,000 Ant Bahktiari rug, and a $6,000 Tabriz rug. He finally had the Khashoggi life-style he had coveted.
As we unfolded the Renda story we began to wonder how many banks and thrifts Renda had infected and how many had succumbed.10 We soon found out that no one had any idea. In October 1988, from a confidential source close to the Federal Reserve Bank, we did get a partial list of institutions known to have been used by Renda. There were 160 banks and thrifts on the list, scattered from coast to coast and even in Puerto Rico, and 104 had already failed. It became clear to us that the damage Mario Renda had done and was doing to thrifts and banks would be years in the unfolding.
In early 1984 the Indian Springs State Bank and Coronado Savings and Loan receivership's continued to try to figure out who owed what to whom at the two failed institutions. The FDIC and the FSLIC in Washington hired the Kansas City law firm of Morrison, Hecker, Curtis, Kuder & Parrish to handle some of the legal work, and one of the attorneys they assigned to settle some of the bank's problem loans was Michael Manning. Manning was a principled, hardworking Kansas lawyer in his mid-thirties. With no premonition that this would be anything but a routine bank ease. Manning began as usual by dividing up the bank's problem loans with other attorneys in the firm. By pure chance he ended up with most of the Hawaii loans in his stack. When he looked over what he thought were about 30 simple collection cases, he was first puzzled that a small, landlocked bank in America's heartland would have loaned so much money on Hawaii real estate projects. A bank examiner shared Manning's puzzlement: "What in the world was a fly-shit bank in the basement of a shopping center in a suburb in Kansas City, Kansas, doing making these kinds of loans?" (The bank wasn't actually in the basement, but it was partially underground.)
One night Manning stayed late at his office and spread the loan files out on a table to study them together. He immediately spotted startling similarities. He noticed, for example, that many of the borrowers said they intended to use their loan to invest in the same limited partnerships. These were the same similarities that had driven bank examiners months earlier to determine that the many separate loans to the Hawaii partnerships were really part of one big loan. But the examiners had not pursued that insight beyond the point of demanding that Lemaster clean up the loans. If they had, they might have nipped Renda's scheme in the bud, thus saving dozens of financial institutions from Indian Springs' fate. Now Manning had picked up where the bank examiners had left off. He didn't know what the unifying factor was yet, but these were not unrelated loans. He decided to fly immediately to Hawaii to ask these borrowers some questions.
He took 30 depositions, in about that many days, from the Franklin Winkler Sam Daily straw borrowers in Hawaii. Getting straight answers out of them was tough at first. They believed, the borrowers said over and over, that they were not responsible for repaying the loans. Winkler and Daily were, they said. The straw borrowers had broken federal law by allowing their names to be used on fraudulent loan statements, but they claimed they were as much victims as the FDIC and FSLIC.
From those depositions emerged a fuzzy picture of only the Hawaiian end of the operation. But Franklin Winkler and Sam Daily were clearly implicated in some larger scheme. Some of the borrowers mentioned someone in New York named Mario Renda. And the borrowers had bits and pieces of information concerning similar deals in other places like Texas and Los Angeles, but how those events tied together was still unclear. What Manning did know for certain was that he had stumbled upon an enterprise that reached far beyond his stack of 30 defaulted loans.
One Hawaii borrower realized immediately that Manning's questions were leading somewhere other than to a simple resolution of some overdue loans. He dug in his heels and took the fifth amendment 52 times during Manning's deposition. Ironically , the questions he refused to answer clued Manning in to the sensitive areas. Manning also deposed Franklin Winkler. Charming and friendly as usual, Winkler nevertheless took the fifth amendment to every question Manning asked him—even his name—for three days.
Manning went home to Kansas City more convinced than ever that he was onto something important. He began to keep a daily diary of clues, often isolated notes that made little sense but "seemed" important. The case was beginning to consume him. It was on his mind all the time. What had been going on at Indian Springs State Bank? It seemed to be bigger than Franklin Winkler and Sam Daily, somehow. Other states were involved, the borrowers had said. Were other banks in danger? he wondered. How widespread was this enterprise? Manning spent his days, nights, and weekends trying to piece together the answers to the puzzle.
Finally, after weeks of struggling with his conscience, the straw borrower who had taken the fifth 52 times phoned Manning and said he wanted to talk. He then exposed Mario Renda's key role in the scheme. There was a deposit broker in New York, he said, who had made "courtesy deposits" at Indian Springs State Bank. In turn, the bank loaned money to straw borrowers who gave the money to Franklin Winkler, Daily, and Renda and companies and limited partnerships they controlled. Manning realized now that he was dealing with a sophisticated form of linked financing, structured through a maze of interlocking partnerships and companies until it became almost impossible to detect. Who knew how many other banks and thrifts might have also been victims, he thought.
Though hired by the regulators 11 to pursue civil actions against those who owed money to Indian Springs State Bank and Coronado Savings, Manning felt he now had absolute evidence of criminal bank fraud (admissions from the straw borrowers) and he convinced Kansas City FBI Agent Ed Leon of his case. Leon, and later Manning, took this evidence to an assistant U.S. attorney in Kansas City, Kansas, expecting that she would immediately open an investigation. Instead they ran head-on into the frustrating realities of white-collar crime prosecution in America. She was not interested in his case, she told Manning. It would take too long to "turn." Her office's resources were limited. The Department of Justice demanded visible results, tangible statistics—indictments and convictions, and lots of them. Bank fraud cases took years to unravel. Thanks, but no thanks. Incredulous, Manning next carried his evidence to the Organized Crime Strike Force in Kansas City, where he got the same cold shoulder.
Manning reported his findings to Christopher "Kip" Byrne, senior trial attorney for the FDIC in Washington. Byrne had supervised Manning's pursuit of the Hawaii straw borrowers and shared his concerns about the strange nature of those loans. He had also heard of Mario Renda because of the periodic squabbling in Washington about the role of deposit brokers in bank failures since the collapse of Penn Square Bank in Oklahoma in 1982. Still, no one in the Justice Department would move on Manning's information.
Then, in September 1984, Manning got a break. Six of Renda's bullpen brokers and Renda's personal secretary decided to break with Renda and start their own deposit brokerage firm. This resulted in a messy legal battle because, before hiring them, Renda had secured a pledge that they would not go into competition with him. So when they struck out on their own, Renda sued. The seven former employees later explained that they had read the American Banker articles about Renda, and one of them went to Washington to try to dig up some dirt on their old boss to further their side of the case. Byrne's name had appeared in the American Banker stories about Renda, so the former First United broker looked him up and offered to trade information. Was Byrne interested? Absolutely. It looked like Manning finally was going to get the inside scoop on First United Fund. But on the heels of the first meeting, just when Manning and Byrne were so close to Renda they could smell him, the seven former Renda employees settled with Renda and lost interest in their deal with Manning and Byrne.
The letdown was intense. To be so close and then to have Renda slip away, it was too much. Manning was beside himself. Questions plagued him: How big was Renda's operation? How many banks were at risk? The congressional hearings, the newspaper stories, all warned of the dangers of brokered deposits. Yet here was Manning, with tangible evidence of possible wrongdoing by one of the country's biggest deposit brokers, and he was being thwarted at every turn. It was crazy. So Manning took off the gloves and played a little hard ball. He went back to the six brokers and Renda's former secretary—"The Seven Dwarfs" he now called them. He threatened, he promised, he cajoled, he pleaded, and he threatened again. Finally it worked.
Their attorneys agreed to let Manning depose them, and he and Byrne rushed to New York before the Dwarfs could back out. Over four days, from dawn to late into the night, they took testimony. And when they were finished they had collected sworn testimony alleging labor racketeering, pension fraud, wire fraud, tax fraud, mail fraud, and bank fraud involving Renda, Winkler, Daily, and others. Never in Manning's wildest imaginings had he guessed he'd walked into a criminal enterprise of such breadth, such stunning magnitude. Not one of the rebel brokers had all the details of the operation, but when combined, their testimony was devastating—and the implications for the bank and thrift industries, terrifying.
On the third day of the interrogation Manning learned from a confidential source that Sal Piga had phoned Renda to say, "The Seven Dwarfs are talking to the FDIC." Manning told us later it was unnerving, to say the least, to have Piga use Manning's own nickname for the brokers. The nickname was an in-house joke at Manning's office in Kansas. How had Piga. in New York, learned of the term? Was one of the Dwarfs a plant? Were Manning's phones or offices bugged? What else did Piga know? Later, when two FBI agents went to the home of one of the Dwarfs to ask some questions, they found themselves staring down the barrel of a shotgun. The Dwarf had feared that the agents were Renda's men.
The sworn testimony Manning and Byrne had taken from the Seven Dwarfs was valuable and important, but by itself it could not carry the case. They needed documents, written proof from the files of First United Fund itself. But during the depositions the Dwarfs were adamant. No, they would not provide documents. That would be really pushing their luck. They were afraid. Manning and Byrne expected too much. Their lives were in danger, it was too much to ask. But just when Manning was about to give up, someone on the inside at First United Fund suddenly, and without explanation, produced the "smoking guns" Manning needed.12
Manning, on his way to catch a plane home to Kansas, pulled into a dark airport parking lot. He walked around to the back of the car and opened the trunk to take out his suitcase. There, in the trunk, was a fat stack of First United Fund documents. How they had gotten there Manning would never say. If he suspected anyone in particular, he knew it would be foolhardy and dangerous to speculate out loud. In ten days that silent stack of documents would collapse Renda's world.
Manning knew they had to move fast. Renda was no doubt prepared to take steps to protect himself if he learned they were getting close. Byrne took the evidence to Organized Crime Strike Force attorneys in Washington. They listened and sent Bryne and Manning and their evidence to the Brooklyn Organized Crime Strike Force, saying that Brooklyn Strike Force attorneys might have an interest in the case. They did. First United had come up in connection with an ongoing investigation the strike force was conducting into racketeering by the Lucchese crime family. Through the use of wire taps and bugs approved to investigate the suspected mob bribery of Teamster officials at Kennedy Airport, investigators had picked up an alleged mobster 13 talking about how Schwimmer, First United Fund's financial consultant, was helping him launder money through bearer bonds.14
The name First United Fund, therefore, got their immediate interest. "They were willing to spend the cerebral energy to understand the case," Manning told us later, and he spent the next ten days with them going over the details. Tough, straight-talking Assistant U.S. Attorney Bruce Maffeo (ironically pronounced like Mafia, with an "o": Mafio) picked up immediately on the importance of the case.
Now they needed to obtain a search warrant for a raid on First United Fund offices. Any documents still there had to be secured before Renda had a chance to remove or destroy them. But someone had to sign an affidavit setting forth the legal grounds on which they wanted to execute the search warrant. Manning was the obvious choice, since he was the one with the evidence against Renda, but Manning was working for the FDIC and had to have their approval for such a drastic action. The affidavit would contain slanderous allegations about the man who ran one of the largest brokerage firms in the United States. No, the execution of a search warrant by Manning, a representative of the FDIC, was out of the question, regulators said. At that point Kip Byrne, apparently outraged by the regulators' refusal, intervened. "Permit Manning to sign that search warrant or you can take my job and shove it," he said, in so many words. This was absolutely insane, he fumed. Was Mario Renda untouchable?
Voices don't often get raised at the FDIC and such an outburst by their own senior trial attorney shocked the stodgy regulators into reluctant action. They acceded to his demand ... he just better be right. Ten days after Manning had found the First United Fund documents in the trunk of his car, Maffeo's troops, 30 FBI and IRS agents, assaulted the First United Fund offices at 1001 Franklin Avenue in Garden City, New York, with the search warrant in hand. Manning and Maffeo had been tipped that Renda was attending an all-day conference and would be out of the office—it seemed like a good day to go calling. For the next two days they filled box after box with First United Fund's books, records, files, and even personal notes. Six days later agents raided Franklin Winkler's company in Honolulu, hauling another 100 boxes of files off to Maffeo in New York.
For both Manning's civil case and Maffeo's criminal racketeering investigation, the haul was a windfall. Among the booty investigators found some revealing items—some deadly serious, some humorous. There were verses to a tongue-in-check song written for Renda by a First United employee. "The Twelve Days of Bilking," which was sung to the tune of "The Twelve Days of Christmas, " outlined, stanza by stanza, how brokered deposits were used to con banks and thrifts. The last stanza referred to such things as "banks a-failing," "accountants auditing," "checks a-bouncing," "cops arresting," and "Steve Black hanging from a tree."16
Another song penned by Renda employees was entitled "Bilkers in the Night," sung to the tune of "Strangers in the Night."
The songs were amusing. A lot less amusing was evidence that Renda had used First United Fund as a giant Trojan horse that had been granted entry into dozens of banks and thrifts across the United States. A lot of the names of institutions where the Seven Dwarfs had said Renda had special deals going were found in the records seized at First United Fund:
Mission Bank, Mission. Kansas
Coronado Federal Savings and Loan, Kansas City. Kansas
The Metropolitan Bank. Kansas City,
Missouri Metro North Bank, Kansas City, Missouri
First Federal Savings and Loan. Beloit. Kansas
Farmers and Merchants Bank, Huntsville, Missouri
Rexford State Bank, Rexford, Kansas
Metropolitan Bank and Trust, Tampa, Florida
American City Bank, Los Angeles, California
Newport Harbor National Bank, Newport Beach, California
Sparta Sanders State Bank, Sparta, Kentucky
Community Bank, Hartford, South Dakota
Western National Bank of Lovell, Lovell, Wyoming
Emerald Empire Banking Company, Springfield, Oregon
Knickerbocker Federal Savings and Loan, New York, New York
State Savings and Loan, Clovis, New Mexico
Valley First Federal Savings and Loan, Van Nuys, California
Indian Springs State Bank, Kansas City,
Kansas First National Bank of Midland, Midland, Texas
The Teamster and Steelworker pension funds that Renda and his partner Schwimmer skimmed from were deposited at:
First Savings and Loan of Suffolk, Suffolk, Virginia
Westwood Savings and Loan, Los Angeles, California
North Mississippi Savings and Loan, Oxford, Mississippi
Old Court Savings and Loan Association, Baltimore, Maryland
First Progressive Savings and Loan, Westminster, Maryland
Sharon Savings and Loan, Baltimore, Maryland
First Border City Savings and Loan Association, Piqua, Ohio
Bank of San Diego, San Diego, California
Central Illinois Savings and Loan, Virden, Illinois
Montana Savings and Loan, Kalispell, Montana
Virginia Beach Federal Savings and Loan, Richmond, Virginia
Heritage Savings and Loan, Richmond,
Virginia Comstock Bank, Carson City, Nevada
Investors Savings and Loan, Richmond, Virginia
Standard Savings Association, Houston, Texas
Alliance Federal Savings and Loan, Kenner, Louisiana
Valley First Federal Savings and Loan, El Centro, California
Mainland Savings Association, Houston, Texas 16
It was a long list and Manning couldn't even be sure it was complete. What investigators did notice was that more than just a few of the institutions listed also appeared on the FDIC and FSLIC's growing casualty lists. In fact, from January 1982 through June 30, 1985, First United Fund was number one in the nation in brokering deposits into banks that later failed, 28 in all, even though in 1985 it was only thirteenth in the nation in volume of deposits placed.17 In comparison, Merrill Lynch, which brokered nearly 30 times the volume of deposits, brokered into only two institutions that closed.18
It appeared that Renda had supplied money to nearly all the go-go thrifts in the country.
By late in 1984 Sam Daily was all too aware that Renda and Winkler had left him to take the rap. Increasingly paranoid, he was certain they were trying to frame him. (He would eventually be convicted of conspiracy in the scam.) In an apparent attempt to short-circuit such a plot. Daily shot off two pages of his famous prose to the Honolulu police:
Dear Officer,
If you check your files you will find that some time about a year and a half ago, someone tried to put Mr. Winkler's lights out. Fortunately for Mr. Winkler they failed. . . .
After a rambling discourse outlining the troubles he'd seen, Daily finally got to the point:
To that end, I am asking you to investigate this matter so that should one of Franklin Winkler's numerous enemies eliminate his fat body from the face of our good earth. I will not be the suspect.
A month later Daily sent Winkler a letter that unquestionably outdid all his earlier literary efforts. This letter, which exposed Daily as an anti-Semite (the letter was referred to by investigators simply as "the fat, slimy hymie letter") also showed the stress Daily was under:
Franklin:
I just received your letter. It's really not worth commenting on, except to say that I had a friend and client, who is a criminal psychologist, review your letter.
My friend is a Jew, and specializes in studying the behavior of the criminally insane and mentally ill Jew, under a grant funded by the Nation of Israel. The purpose of the grant is to identify Jewish individuals who degrade, by actions and deeds, the standards to which the true Jew adheres.
He said the writer of the letter was obviously a psycho, and probably a fat. slimy, hymie and scared as hell.
I said to my friend, "what is a hymie?" He replied: "Unfortunately, Sam, regardless of the high standards to which a group, such as us Jews subscribe, there is always that minority who degrade the rest of us. They are present in your Protestant Group, in the Catholic Religion, and in all other religious and ethnic groups as well. The most demented of the group, to which the author of the letter under discussion obviously belongs, is referred to by other Jews as a hymie. I believe the word first appeared in the 1920 dictionary of the underworld, published in New York."
I congratulated him on his accuracy, and in our conversation he asked me, "Why is the fat, slimy, hymie so scared?" I replied; "my friend, if you had done all of the following in three short years, what would your emotional feelings be." . . .
He may have framed [names deleted] and others into a murder for hire plot. ...
He was a major factor in Bill Lemaster, President of Indian Springs State Bank, committing suicide, or, "whatever," ...
He stole some $800,000,00 from First United Partners Four, with some 10 Partners, all of whom are mad as hell.
He and an associate made a phone offer to buy a bank to incite the bank into making loans which, in part, caused the failure of the bank, and an alleged loss of $5,000,000.00 to the shareholders of the bank, [Indian Springs) ...
He is being investigated by the FBI on numerous accounts, . . .
He has over 130 lawsuits pending in Honolulu alone, and He stole in excess of $500,000.00 from me.
The criminal psychologist interrupted me. "Sam," he said, "I understand the SOB IS a fat. slimy, hymie, crook who has taken some $3,000,000.00 from some 50 odd investors in three short years [a reference to Daily's straw borrowers], and that he is probably going to prison, but that doesn't explain why he is so damned scared."
I replied; "my friend, I spent my time in Korea, Vietnam, Thailand, Laos, and other parts of Southeast Asia. I have seen literally dozens of good men die. Some died bravely, most prayed, a few begged; all were scared. But in all of my experiences, I have never seen anyone so afraid of death as Franklin Winkler. I think the answer is simple. The men I have seen die had a cause that involved someone else; that is to say "Duty, Flag, Country, Family, or Friends. " They had feeling for others; a sense of loyalty, honesty, truthfulness, and fairness to those with whom they dealt. Franklin Winkler has only himself and his Dad, who has one foot in the grave and one foot on a banana peel. He loves no one, and in turn, no one loves him. He has no God. He has only greed. "
The criminal psychologist said, "Oh, now I understand. It is as plain as day. He is a fucking fat, slimy, hymie."
Franklin, if I were you, I'd be scared as hell, too. You've screwed over 50 families, ruined them. When you consider that probably 25% of our population, on a random basis, are nuts, there's probably at least 25% of 50 families out there who are capable of spilling your guts and your nuts on the paking [sic] ramp floor, or in the alternative, putting a .38 slug thru your demented brain.
Mind you, I have no interest in inflicting physical harm to your fat, slimy, hymie body. I'd rather hand you a bar of soap or a jar of Vaseline as you walk into Leavenworth [prison], and watch those big mean studs, there for violent crimes, line up to screw your fat, slimy, hymie ass.
Have a good day Franklin,
Sam
Daily's literary thrashings came to naught. He was securely locked in the web woven by Franklin Winkler and Mario Renda, a web designed to leave them a safe arm's length away from the partnerships when the Hawaii loans went into default. On one side of Daily were the FDIC and FSLIC, who were
looking for millions of dollars missing from their crippled institutions in Kansas,
and on the other side were the nearly 50 straw borrowers who had been told to
turn over their loan proceeds to Daily and "not to worry."
In early 1985 Manning sued Renda, Franklin and Leslie Winkler, Daily
and others for $60 million on behalf of the FDIC and the FSLIC 19 for causing
the collapse of Indian Springs State Bank and Coronado Savings. The suit accused them of racketeering and charged that the defendants had conducted
and participated in an "ongoing criminal activity." The Manning lawsuit began
the destruction of Mario Renda's empire.20
next
The end of the Line 139 s
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