Even during the Great Depression, none of Houston's banks failed. Last month, however, the queues began forming each day before dawn outside the defunct Sharpstown State Bank as depositors applied for payouts from the Federal Deposit Insurance Corp. The agency was making good on accounts —but only up to $20,000 each. About $16 million seemed, for the time being, lost to depositors.
Nor was that the only loss in what was shaping up as a Texas financial-political scandal large enough to eclipse Billie Sol Estes' capers of a decade ago. According to the Securities and Exchange Commission, which has filed a civil suit in a Dallas federal court against 15 individuals and 13 Texas companies, the conspiracy involved fraudulent manipulation of stock prices, trading in unregistered stock, and arranging bank loans and stock trades beneficial to politicians. Though not named as defendants in the suit, a number of the highest Democratic state leaders are implicated, including Governor Preston Smith. Amidst the debris:
> The Strake Jesuit College Preparatory school, through its dealing with Frank Sharp, a central figure in the SEC suit, lost $6,000,000.
> National Bankers Life Insurance Co. and the Olympic Life Insurance Co., both controlled by Sharp, have been taken over by the state of Texas while the SEC surveys the damage. Stockholders are suing the former managements, claiming that "insiders" reaped big profits by manipulating stocks.
> One witness in the year-long SEC investigation, Michael Makris, a Houston businessman, has been indicted for committing perjury concerning his involvement with Sharp and the Jesuit school. A federal grand jury is to reconvene later this month and it may consider further criminal proceedings.
The defendants, charged the SEC in its civil suit, "systematically looted the banks and insurance companies involved in their scheme." Said one official: "As far as can be determined, this is the biggest case we've ever had. It may run up into the tens of millions of dollars."
Big as Houston. The scope is appropriate to the ambitions of Frank Sharp, 64. an East Texas country boy who abandoned the plow at 19 to learn big-city ways. He became a wealthy real estate developer after World War II; one suburban project alone involved 15,000 houses. "You just wait," he once said. "Some day I'll have a city out there bigger than Houston." He also prospered in banking and insurance.
Some years ago, Sharp, though a Methodist, became a benefactor of the Jesuit school and was named a "Founder" of the Society of Jesus. He was the only American Protestant ever to receive that honor. Beginning in 1967, he conducted a complex series of financial transactions with the school, transferring large sums of money and blocks of stock between the institution, his business enterprises and himself personally.