TIME: Almanac 1993/TIME Almanac 1993.iso/time/022089/02208900.025

Text File | 1992-09-23 | 3.6 KB | 71 lines

                                                                                BUSINESS, Page 71

"Dad Would Make a Deal with the Devil"


    Of all the fast-buck artists who contributed to the savings
and loan crisis, Herman Beebe Sr. is among the most notorious.
Rising from an impoverished boyhood in Louisiana's woods, Beebe
had built, by the early 1980s, a $150 million financial empire
that stretched across the Sunbelt. But the brash, stocky
financier was actually a ringleader in a network of good ole
boys who helped ruin more than a dozen savings institutions by
handing out as much as $10 billion in reckless loans -- some of
which ended up in Beebe's own pocket. Recalls Beebe's son Ken,
who worked for him: "Dad would make a deal with the devil if it
looked good."

    The centerpiece of Beebe's empire was AMI, his company based
in Shreveport, La., which invested in banks and thrifts,
insurance companies, motels and nursing homes. Beebe and his
colleagues at one time or another held control of nearly 40
banks and S & Ls, through which they allegedly made insider
"back-scratching" loans to finance one another's high-risk
moneymaking schemes. Their tower of debt collapsed in 1986,
brought down by the energy bust and tenacious federal
investigators. Having pleaded guilty to two counts of fraud in
1988, Beebe, 61, now washes laundry in a federal prison in
Texarkana, Texas, where he is serving a sentence of one year
and a day.

    Beebe used his financial institutions to bankroll everything
from polo fields to time-share condos and mini-warehouses.
Though a 1987 federal case against Beebe ended in a mistrial,
the Government has contended that he was one of his own biggest
customers, using the network of banks and thrifts to finance
ventures in which he held hidden interests. "He saw the thrifts
as one big gold mine, an endless pit of money," says Joseph
Cage, a U.S. Attorney in Louisiana who prosecuted Beebe. Rather
than exert his ownership outright, Beebe often held control
behind the scenes. One of his tactics was to stake friends like
the high-flying financier Don Dixon, who relied on Beebe's
backing to acquire Texas-based Vernon Savings & Loan in 1982 and
rode the institution to a spectacular collapse in 1987.

    As Beebe's enterprises grew, he reveled in the trappings. He
acquired a nine-passenger Hawker Siddeley jet to carry business
associates on golfing trips. He took clients duck hunting in the
Louisiana marshes on a lavish two-story barge. In Shreveport,
he built a $1 million home for his family, as well as a gleaming
seven-story office building.

    But under the glare of investigations, Beebe's roof began to
cave in. He was convicted in 1985 of defrauding the Small
Business Administration on a loan it made to finance a nursing
home from which Beebe allegedly profited. Beebe was sentenced to
perform community service, while some of his associates were
acquitted. Two years later, the Government accused him of fraud
for making loans to a quarter-horse breeder with whom Beebe
allegedly held an interest in a tax-shelter scheme. After the
1987 mistrial, Beebe pleaded guilty last year to the two fraud
counts.

    Stripped of his wealth, Beebe is hounded by collectors from
the Internal Revenue Service, the Federal Savings and Loan
Insurance Corporation and the Federal Deposit Insurance
Corporation, which last month sued him and 20 other bank
executives for $20 million. But Beebe remains unrepentant. "The
FSLIC was encouraging the thrifts" to be aggressive, said
Beebe's lawyer, James Adams. "Herman felt he could make money,
so he got in. He doesn't feel he did anything wrong."