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Silverado 6 – E. Trine Starnes Jr – With God And Ronald Reagan On His Side

February 9, 2010

Peter Brewton describes E. Trine Starnes Jr as perhaps `the biggest con man that Texas ever produced’ , a dubious honor. (1) Brewton adds:

In terms of dollar amounts [stolen] he easily distanced Billie Sol Estes, friend of LBJ and Morris Jaffee and on a national scale he is right up there with the fugitive financier Robert Vesco

Sol Estes and Vesco, were minor leaguers compared to more modern day financial crooks like  Bernie Madoff, Bernie Eggers, Ken Lay and Jeffrey Skilling, but in their day Sol Estes and Vesco were `the Magellan’s’ of their age, probing as yet untapped possibilities of massive fraud,  financial shyster pioneers of sorts, paving the way for even higher levels of greed and corruption in the post millenial world. And smooth talking E. Trine Starnes Jr – who never spent a night in jail (from what I can tell) –  is right up there with the best of them, and with God and Ronald Reagan on his side to boot.

Certainly an initial scan of the Savings and Loan literature suggests this an accurate portrait.

Twenty odd years after the scandal has died down, Starnes’ name has almost disappeared from public attention. Two references suggest the man is still with us. The first is  a 2002 reference to Mr and Mrs. E. Trines Jr as being charter members of the President’s Circle of Texas Christian University in Abilene. The second is a 2008 real estate notice in a New Orleans newspaper stating that an E. Trine Starnes Jr sold a condominium there for $ 150,000 odd dollars to the Road Home Corporation. $150,000 is  small potatoes considering the sums that were passing through the man’s hands decades earlier.

Only one bit of information to add to this portrait…an email, from a man claiming to know him. It claims that after the Silverado venture, Starnes lives – or lived – somewhere near San Diego, that he has always been careful to avoid publicity as it could backfire and that he was involved in a real estate kickback scheme in which he’d rent office space for high prices…and then refund some of the money to the renters. The higher rent on the books, inflated the property’s value, making it more profitable to o sell as it gave the appearance the building was more in demand than it was in actuality. The he’d sell the building and the sucker who bought it would wonder why he couldn’t get the rents and profits out of deal that Starnes did.

How accurate a picture? It rings true, the shyster at work trying to remain incognito,  avoiding the limelight, still up to his old tricks, traveling quietly in the same right wing Republican circles, but quietly…

If today Starnes Jr. does not have the name recognition of a Neil Bush, still, in his own way he is one of the more  curious figures whose fate and that of Silverado Bank converged.

Son of a Texas Church of Christ Evangelist

The son of a Texas Church of Christ Evangelist, Ellison Trines Starnes Sr, `Junior’ s’ is nothing short of a non-stop story of a man out of control.

  • His first documented brush with economic troubles was as early as 1973 when at the tender age of 28 he was determined legally responsible for driving a Dallas Texas company called CIC Cosmetics International into bankruptcy. An investor sued and won a judgement against Starnes of nearly $250,000.
  • By 1976 he had lost two more fraud judgments in Houston and filed for bankruptcy, listing his debts at $2.4 million, his assets at $6000.

But this was just the beginning.

Able somehow (but how?) to be discharged from bankruptcy in 1977 he entered the real estate field and began a spectacular decade rise – mostly with other peoples’ money – to wealth and power, at least temporarily.  At his zenith in 1984, a mere 11 years after driving CIC Cosmetics International into ruin and 7 years after emerging from bankruptcy himself, Starnes was in a much more comfortable financial position. He had somehow gained control of 175 companies and real estate partnerships, 50 properties, oversaw the lives of 500 employees and had an alleged net worth of $222 million.

Not bad for the son of a depression era preacher man.

Like Ken Good, Starnes was living in the fast lane.

  • He owned a $1 million home in Houston, a $2 million home in Dallas, a $1 million condo in Vail – watering ground for alot of these Silverado-related scoundrels – and a luxury skybox at Texas Stadium where the Dallas Cowboys played
  • He and his wife Kathryn ran up bills of more than $400,000 at Neiman Marcus, probably just as a matter of principle to keep up with the Jones’s.. or the Bushes
  • He flies around in a private plane

And then, for no apparent reason,  while seemingly riding so high off the hog, in 1988, Starnes suddenly declared bankruptcy once again. As Brewton puts it:

Starnes second bankruptcy was indeed a thing of great beauty and a joy forever sure to warm the cockles of the coldest cynic’s heart (2)

The list of creditors in this Starnes’ second bankruptcy takes up 70 pages with a total of more than 800

  • There were at least 21 banks and savings and loans from New Jersey to Florida to Minnesota to Texas, New Mexico and Colorado
  • Starnes and his wife had 34 checking accounts in 22 financial institutions and Starnes listed 48 pending law suits against him
  • The FDIC had sued Starnes in his bankruptcy filing, claiming he defrauded seven failed banks
  • Although Starnes cites debts of approximately $103 million, the figure is misleading. He doesn’t list the debt figure for most of his creditors and omitted the figure of the largest single debt: $77.5 million owed to Silverado Savings in Denver.
  • An Associated Press story estimated his total debt to banks and savings and loans at `as much as $500 million’.

________________

An Associated Press story estimated his total debt to banks and savings and loans at `as much as $500 million’.

________________

This level of gold medal Olympic level fraud raises a number of questions. How was Starnes able to continually get loans. Some say it was his smooth talking charm. No doubt he excelled at sweet-talking, a useful skill in politics and other forms of high level fraud. A more reflective view suggests this is not, by itself, a credible explanation.

Besides there is another, more tantalizing question that comes to mind: what happened to all the money Starnes borrowed? Did he squirrel it away in his myriad of corporate shells and bank accounts, or was he in the end, merely a conduit for others who used him to get the money giving him his cut, and then funneled it off elsewhere? Much of the money has never been publicly accounted for. Starnes’ high roller life style only accounts for a small portion of a half  trillion dollars in bank loans. Nor do his varied business interests begin to explain these large sums. It is impossible to tell without a subpoena to get hold of bank records, and even then it would take a finely tuned forensic accountant to make sense of it all.

While the details are more than a bit foggy and the money trail does run cold, still it is interesting that among Starnes’  many bank accounts included some on the Isle of Jersey (in the English Channel) and in the Bahamas – both centers of tax evasion, big money transfers and money laundering.

Starnes and Silverado

Starnes relationship with Silverado Bank also raises questions. He was easily able to secure $77.5 million in loans from the bank – this at a time when the bank was already in trouble and he was already in financial difficulty.  At the very least it suggests how easy it was for people to borrow from banks like Silverado `without even the same checks that a credit card application would receive’ (3).  Starnes got these loans from Silverado “despite the fact that Silverado had no previous experience with Starnes, and that Starnes had a previous history of financial instability,” the FDIC said in its lawsuit against him.

The fundamental question is why would Silverado deal with Starnes in the first place? How did he get tied up with Silverado. Brewton suggests that both Starnes and Silverado had close connections with what is referred to as Riddle/Corson/Aubin/Woods Group – a Texas circle  of developer-banker types who cannot shake their ties to the Mafia, CIA and other low-life types, in particular Herman Beebe (discussed below). While admittedly the connection is speculative, from what I can tell it is based on existing business connections. Besides, if this is not the case, if Starnes’ introduction to Silverado came through another channel, it has never been substantiated. Admittedly gray areas here, and as will be seen below, complex and somewhat painful to even follow to, less confirm. My current take is that Brewton comes as close as anyone to getting to the bottom of all this and that no one else has even come close.

The $77.8 million in loans Starnes and partner Clinton E. Owens took out from Silverado were described as `substandard’ by regulators who wondered about the lack of financial checks on Silverado’s borrowers. The regulators also noted that the very size of the loan violated Silverado’s own rules.

  • The loans came in three tranches, the largest one was for nearly $31 million for the purchase of an orange juice plant near Ft. Pierce Florida that was sold by one Starnes partner to another one. Once sold, the plant was then leased to a company called `TreeSweet Products’ , which incidentally happened also to be owned by Starnes and partner Clinton E. Owens. In classic Starnes style, he happened to be the buyer, seller and real estate agent for the deal and got a cool $1.9 million commission to the sale to himself, payable out of Silverado proceeds.
  • In another of the deals in which the loans were used, a Starnes group used $10 million in proceeds from TreeSweet loan to buy the Breckenridge, Colorado Hilton, which Silverado was trying to sell. As with the `TreeSweet Products’ deal, using money borrowed from Silverado, he (or his company) bought a hotel from Silverado in which he also acted as the real estate broker. In this deal, Starnes paid himself $3.8 million in real estate commissions- or double the commission he had gotten from TreeSweet, all with money borrowed from Silverado.
  • The third Silverado loan to Starnes was for $16.5 million with the mortgages of two office buildings in Colorado Springs and a second mortgage on an office building in Denver used as collateral. According to the federal investigators, the deal was pretty shady as the loan was used to refinance existing debt on the Colorado Springs building and to purchase a bad loan Silverado held on the Denver building. Again, in exchange for offering Starnes a loan for his business concerns, Silverado, already overloaded with toxic assets hoped to dump some of it off on Starnes, making their books look a little better as a part of the bargain.  Predictably, Starnes’ group defaulted on the Colorado Springs properties, which were in any case, worth far less than the amount of the loan.

Looking into the TreeSweet deal, FDIC investigators noted more irregularities, of the type that were typical of both Silverado loans and Starnes’ modus vivendi.

  • The regulators observed that the value of the land and property securing the loan was worth much less than the loan amount. The value of the lease was equally suspect. TreeSweet, the lesse, had suffered 18 months of operating losses and was likely to have serious difficulties making its lease payments.
  • The FDIC report went on to state that Silverado had no experience in making this type of loan; even its lending officer for this loan conceded that that he did not understand the operation of the TreeSweet plant. This inexperience resulted in Silverado’s failure to obtain reasonable collateral on the plant’s equipment and spray fields.
  • Silverado closed the loan – again to someone they hardly knew – without even getting a written appraisal on the property
  • A federal examination report on Silverado later stated that although the written appraisal on the property came in at $31.5 million – the approximate value of the Silverado loan to Starnes – that this was $14 million higher than the price the Starnes group paid to acquire the plant in May 1985. Given the fact that TreeSweet was losing money during this period there is no way that it could have appreciated that much in just 3 years. Again, phoney appraisals were common during the S&L scandal. Inflating property values became the basis for getting larger loans.
  • TreeSweet ceased operations and declared bankruptcy in January 1988. Starnes had made a financial killing on the commissions. Silverado was left holding the bag on a $30 million loan.

 The FDIC suit against Starnes also went to point out that Silverado’s  directors “were willing to make large sums available to Starnes even for speculative and poorly underwritten projects in exchange for assistance in temporarily removing bad loans from Silverado’s books.”  “Federal regulators  sued Starnes in his Houston bankruptcy case, trying to block him from walkingaway from his debts a second time. The government accuses Starnes of defrauding seven failed banks,and sought $2 million from Starnes – a pittance of what he had been able to get his hands on in the first place.

Regulators examining Denver-based Silverado raised questions about the Starnes dealings, including why financial statements weren’t obtained on all borrowers and the insider nature of the dealings. In the separate Houston civil suit, the FDIC specifically names the Silverado-Breckenridge transaction as “calculated to cause willful and malicious injury,” and accuses Starnes of falsifying financial statements. At the time, Neil Bush, President George Bush’s son, was on the board of directors at the time of the Starnes loans, but Bush’s attorney, James Nesland, said Bush couldn’t recall if he voted on the Hilton transaction. Helps to have a bad memory these days.
Beyond Silverado

Starnes’ connections go far beyond Colorado. A very brief sampling of his interests is suggestive of the worlds in which Starnes navigated:
  • In Texas he had business dealings with the Allied Bank of Texas, controlled by Walter Mischer, one of the state’s and the nation’s most powerful political brokers.  Starnes also had ties to what was called the Riddle/Corson/Aubin/Woods Group
  • He also loaned money from Continental Savings in which New Orleans’ Herman K. Beebe, convicted felon and Mafia associate had controlling interests opening up a whole new realm of possibilities and connections. Beebe was a busy man. Altogether, he  controlled, directly or indirectly, at least 55 banks and 29 S & L’s in eight states. What is particularly interesting about Beebe’s participation in these banks and savings and loans is his unique background. Herman Beebe had served nine months in federal prison for bank fraud and had impeccable credentials as a financier for New Orleans-based organized crime figures, including Vincent and Carlos Marcello.
  • From Continental Savings, Starnes was able to borrow $25 million, an amount that would not have been possible without Beebe’s support.  Some of that money was used to purchase and develop the ten story Marina City office building in Chicago.
  • As the indomitable researcher Brewton adds `Starnes also had a close relationship with West Belt National Bank where Sandsend Financial Consultants of the Isle of Jersey, an offshore company involved in secreting ill-gotten S&L and drug proceeds, had its Houston bank account. (4)
Starnes and the Nicaraguan Contras

Starnes’ Texas-Lousiana banking and Mafia connections might shed some light on, as Brewton poetically puts it `why a bustout and con artist like [Starnes] was one of the biggest private donars to the Contras’.
Throughout this period, E. Trine Starnes Jr.’s ties to right wing causes, to Reagan and even more – to the Bush family were well known and as publicized as his lifestyle. Among his pet projects, joining the likes of Oliver North and Ward Churchill, was support for Nicaragua’s `Contra’s – that collection of associated reactionary low lives, funded in large measure by the Reagan Administration to bring down the Sandinista Revolution.
Documents made public through in the Iran-Contra arms and money investigation show Starnes donated at least $30,000  to the Contra’s through what was called the National Endownment for the Preservation of Liberty (NEPL) . Founded with initial seed money from Herman Beebe (listed above) of $2.8 million,  the NEPL was an integral part of Oliver North’s Contra funding and arms support network. NEPL was headed by one Spitz Channell who was close enough to the president to get Starnes invited to the White House  on Jan. 30, 1986  for meeting with Ronald Reagan.
Starnes’ contribution was designated for Channell’s `Central American Freedom Program’ whose goal was to get Congress to provide funding to arm the Contras. It produced propaganda film footage claiming to show Sandinista atrocities and depict Nicaragua as a center of global terrorism and narcotics trafficking. Ring a familiar contemporary bell in Central Asia? Perhaps this was the start of a great tradition that has gotten mileage ever since.
A decade prior to Starnes’ known Contra support, he was on the board of  Charter Bank of Houston run by former Houston real estate developer and Houston Mayor Bob Lanier.  Charter was a main funder of an airline manufacturing company,  Atlantic Aviation, a Delaware company that sold commercial aircraft. Atlantic hired one James Bath to run its Houston office.  It is the possible Atlantic Aviation – Jim Bath connection that opens vistas to all kinds of possible shady deals and relationships  which at the very least are suggestive of the world in which both Starnes – and Silverado Bank – moved.
Atlantic Aviation, by some accounts, was little more than a CIA operation to transfer arms and supplies to Central American reactionary governments and movements, among them the Contras. (5). It was owned by Edward Dupont of the famous Delaware Dupont family.  It seems that the family had an attraction to aviation companies as Dupont’s brother, Richard, owned Summit Aviation. and Investair. According to a 1983  NY Times report both of Richard Dupont’s companies were organized to do `classified military work for the government and Central Intelligence Agency and employed former C. I. A. employees. The C.I.A used private commercial air companies like Atlantic Aviation to move tons of weapons and supplies to its allies in Laos and Cambodia during the Vietnam war years. After 1975, the operations shifted to Central America.
Starnes’ Charter Bank-Atlantic Aviation-possible CIA connection is all the more curious as it leads, through Jim Bath,  not only to C.I.A. – Contra support, but beyond – directly to the Bush Family and curiously enough to that now famous Saudi construction family run by one Salim Bin Laden, heir to the Bin Laden Group fortune and the more imfamous Osama’s older brother by eight years. Bath became a key middleman between the Bush’s and Bin Laden leading to some $ 4 billion in contracts to Bush economic interests – Harken Oil Company among them – in the oil rich country.  E. Trines Starnes is not six degrees of separation from all this, but one.
Apparently the Starnes-Bush connection mixing oil, CIA, real estate goes back a good ways. In the early 1990s at an Austin Texas lecture on the Savings and Loan Scandal, investigated journalist David Armstrong mentioned that George Bush’s (the elder’s) Zapata Oil Company leased land from E. Trine Starnes’ preacher father. (7)
Tentative Conclusions

Another Silverado borrower whose path has an uncanny habit of crossing with C.I.A – Mafia connected folk was developer Richard Rossmiller, an associate of Herman Beebe mentioned above.  Rossmiller, whose extended family  lives in Denver,  was able to borrow more money from Silverado than even Starnes, Rossmiller knew Bill Walters, another major Silverado player and big lender. Rossmiller and Walters were partners in The Peoples’ State Bank in Marshall Texas at the same time that Rossmiller was engaged in business transactions with Beebe. It all gets so convoluted that most people get bored tracing the connections which is pretty much why it was set up that way in the first place. Plus, as the relations are grayish, unclear, complex and quite difficult to unlock, – while the connections can be documented – their meaning is harder to discern.  Keep in mind, that investigative reporters delving into this sort of stuff – as they get closer to more sensitive information – run into all kinds of interesting road blocks. Some lose their jobs, others have painfully short lives.
That said, over time, alot if not all the facts shake out.
The very least that can be said is that where there is smoke there usually is fire. There is a tremendous amount of money still unaccounted for in the Savings & Loan scandal. It is impressive how little federal investigators were able to `follow the money’, the trail often ending at banks in the Bahamas, the Isle of Jersey, Switzerland where the odor of drug, Mafia and CIA money laundering and corporate tax dodging permeates the air. The loans were given all too easily by banks like Silverado caught in a crisis of their own making by deregulation. They gave indefensible amounts of money to shysters, con-men like E. Trine Starnes Jr, Ken Good and Bill Walters, real estate developers shielded by lawyers, accountants and a purposely lax, sloppy and at times complicit state and federal regulatory system with tax payers footing the bill.
And in classic American style, the bigger players in all this get away scot free using either their political connections, high paid lawyers or both to avoid prosecution and to protect their ill-gotten fortunes. Then, they become philanthropists funding the arts, museums, higher education, to help perfume the stench surrounding their names. And they give each other human rights awards and have buildings named after them at universities. When the bigger fish are caught and indicted, they rarely do much prison time if any; some of the smaller-fry getting harsher sentences.
Neat system. It’s part of what makes America the great country it is.

1. Pete Brewton. The Mafia, CIA & George Bush: Corruption, Greed and Abuse of Power in the Nation’s Highest Office: The Untold Story of America’s Greatest Financial Debacle. SPI Books. 1992. p. 252.

2. ibid p. 253

3.  Seattle Times. `Smooth Talking S&L Borrower Goes Broke Twice’. September 23, 1990

4. Brewton, op. cit. p.256

5. http://stuartbuck.blogspot.com/2004_04_01_archive.html

6. ibid

7. http://www.acorn.net/jfkplace/09/fp.back_issues/17th_Issue/rambler4.html

 


3 Comments leave one →
  1. November 30, 2010 5:36 pm

    Beneficial Blog! I had been simply just debating that there are plenty of screwy results at this issue you now purely replaced my personal belief. Thank you an excellent write-up.

  2. someone who knows him permalink
    April 22, 2011 5:58 pm

    You only touch the tip of the ice berg. A real slick deal. His office bldgs. tenants would agree to pay inflated rents and then get a rebate after the proprty was all filled up he would refinance and the “sell” the building with little money down and transphere it to some sucker.
    If you want to contact me put Trine in the subject line. Just one of his ploys.

  3. May 17, 2011 8:56 pm

    it seems to be a good news for the online Bhamas Real estates industry.

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