Silverado 1 – The Michael R. Wise Legacy To Colorado Banking

Michael Wise.

(slightly revised – May 3, 2010)

Note: This is the first episode in a series I hope to produce on this blog essentially about the Silverado Bank Failure in Colorado and the S&L Scandal of the late 1980s. In some ways it is ancient history, happening so many Middle East wars, weapons systems and financial scandals ago. I am delving into this for several reasons. I suppose the main reason is that I happen to pass rather often these days, the old Silverado Bank building on S. Colorado Blvd near where I work .

But I am developing a course on financial scandals and am impressed with how many parallels there are between the current financial crisis and those of the past – a pattern of deregulation, virtually no regulation by those agencies that might have intervened to plug the damage, the small fry get nailed but the big fish – be they scoundrel developers of the Silverado days, or the financial managers of today, walk free for the most part (with a few exceptions like Madoff).

A lot of people who did not go broke on the S&L scandal have – along with their shyster lawyers – become fabulously rich and powerful and where they used to rob and steal the public blind, today they are philanthropists, competing with each other to have their names on university buildings, museums etc. It would all make a great musical, really…if it weren’t for the fact that the country is going to pot. And somewhere along the way – finance, development, what is loosely and inaccurately called `organized crime’ and governmentseem to intertwine, then and now. With Kermit Mowbray, Michael Wise and now Ken Good, I’ve really just scratched the surface… more to come. RJP)

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Michael Wise – The Golden Boy From Emporia Kansas – Walks The Plank

On April 8, 2009, just seven months ago, Michael R.Wise paced along the ninth story of a parking garage at Tampa International Airport. As if intending to arrange a coffee date, Wise first sent a text message to a 26 year old former employee, one Chris Copelan who had worked for Wise at CFIC Home Mortgage Co. before that company collapsed. The message said `I am looking forward to catching up with you’.

Having delivered the message to cyberspace, then, taking his last long step, Wise `stepped off the side’, plunging to his death below. According to witnesses, he landed in a landscaped area with palm trees and some greenery. At 1:30 in the afternoon at a nearby hospital, Hillsborough Medical Examiner, Henry Pouge pronounced Wise dead. Having viewed a parking lot video that recorded Wise’s last moments, the airport police, ruled out any foul play. Of course let us be a little skeptical about such reports although we can not prove otherwise.

Thus ended the life of the former CEO of Silverado Bank, perhaps Colorado’s most infamous, at least to date. Wise, hailing from Emporia Kansas, where he had had a short and successful banking career, came to Denver in 1979 to take over the management of a small thrift bank, Mile High Savings and Loan in Littleton Colorado, a Denver suburb just south of the city.

Under Wise’s leadership, the name of the bank would change to `Silverado’, change the rules for savings and loan banking, make a fortune on an ocean of high interest cd’s that it quickly converted to bad loans, and then unceremoniously collapse to be shut down by federal regulators nine years later in 1988.

Silverado – Gone and Mostly Forgotten

The Silverado bank scandal rocked Colorado and the nation some 20 years ago. It was a part of a much larger savings and loan fiasco that saw taxpayers footing the bill for some $500 billion to $1 trillion in losses of a deregulated and profligate savings and loan banking industry that was out of control with greed as banks loaned wrecklessly in competition with one another for bigger and bigger clients. The Silverado collapse – which cost some $1 billion – in some ways was a small chapter in a much larger picture, although it followed the overall trend. Still, at the time, it was the biggest bank failure in our state’s history.

Silverado drew in, one way or another, most of the state’s political figures and many of its high rollers. As President George Bush’s (the elder) son, Neil, was on the board of Silverado, there was a national connection. It appears that the investigation and closing of the failed savings and loan was postponed a number of months in 1988 as to not interfer with Bush’s election campaign. Some people were broken by the scandal – although it was precious few, among them Michael R. Wise, chair of Silverado.

Others were able, against all odds, and probably as a result of rather sophisticated wheeling and dealing to either use the crisis as a springboard to further wealth and power, or tough it out till the storm past to come back stronger. Among the figures that were touched by the crisis were Denve Mayor Federico Pena, Colorado Governors Richard Lamm and Roy Romer, developer Larry Mizel, Gary Hart, political brokers Norm Brownstein and Steve Farber – essentially the entire political class of the state – minus a precious few personalities like Patricia Schroeder. .

The day that federal investigators swept into Silverado to seize its records and close the place down, Wise, at heart a coward, apparently tipped off, had,  fled the premises, leaving a stunned and panic staff to deal with the authorities. When it was all over, Wise was charged was charged with using $500,000 of a Silverado loan for his own use, but somehow acquitted. He was never tried however for his larger responsibility in the $1 billion in losses suffered under his leadership.

Wise Indicted/Found Not Guilty of Fraud

Although under his tutelage, Silverado lost close to $ 1 billion, mostly through policies that Wise initiated and encouraged, he was not indicted for most of the damage he had done. Instead, he was brought to trial for in February 1993 for having himself defrauded Silverado of $1.45 million which he took out as a personal loan. The government alleged that Wise had misused $458,000 of that loan to pay off an old mortgage on his Denver Country Club mansion and to remodel the home.

That he misused the money was never contested by Wise’s attorneys. However, the prosecution, led by Federal attorney Thomas O’Rourke,  was unable to prove that at the time that Wise took out the loan to himself that he intended to commit fraud. Unable to prove that Wise’s intent at the time of the loan, the jury found him innocent and on February 12, 1993 he walked out of federal court a free man and proceeded to The Punch Bowl bar where he celebrated his victory with his lawyer, Gary Lozow, and two other attorneys, Robert McCallister and Stephanie J. Shafer. McCallister had represented David Mandarich of MDC Holdings in a previous federal fraud case and had won that one. Shafer would later be associated with Federal Judge John Kane.

Wise and Zaler

Wise escaped a prison sentence but was banned from working in the Savings and Loan industry for life. Still, like Zaler (see piece below) Wise never changed his ways. A few years later, Wise re-appeared in Aspen, having created a company called Cornerstone Private Capital which, according to Denver Post business reporter Al Lewis made `high dollar, high interest loans in the Aspen mansion market’. Despite having driven Silverado into the ground, Wise was able to attract many wealthy investors, themselves blinded with greed and their brains still up their asses, to the Cornerstone Private Capital project.

While at Silverado, Wise had given himself and his closest lieutenants hefty bonuses and huge personal loans; at Cornerstone Private Capital he simply stole the money out of the till. For this he was once again indicted and this time convicted in Federal Court of defrauding investors of some $9 million. He pleaded guilty and was sentenced to 3 ½ years in prison, spent at a federal prison camp at Leavenworth, Kansas, near his roots in Emporia. Once out of prison, Wise was hired by Chris Likens, owner of Prairie Village, a Kansas-based Nations’ Holding Co., parent company of CFIC. As the mortgage crisis intensified, CFIC collapsed, in part closed down for their practice of hiring felons, Wise being one.

Cut loose from CFIC, Wise’s future looked increasingly grim. His personal life seemed no better than his professional one. His first wife had left him for a doctor, that even before he had left Kansas for Colorado in 1979. A son died in a car wreck in 1997, his second wife dying soon thereafter. Through Likens he met another woman, remarried yet again and moved to sunny Florida, but as his job at CFIC collapsed, so did his third marriage. Economically he’d reached the end of the road. Chris Copelan,the young man Wise had text-messaged just before taking the final plunge, seemed to sum things up in a telephone interview with Denver Post business journalist, Al Lewis:

“I think he just realized that there was no way he could get back to where he wanted to be. So he just said `To the hell with it; I’m done’