Image provided by: Texas A&M University
About The Battalion. (College Station, Tex.) 1893-current | View Entire Issue (Jan. 20, 1971)
• V.v.. . THE BATTALION Wednesday, January 20, 1971 College Station, Texas Page 3 SEC says stock manipulated to influence Texas solons DALLAS </P> — U. S. Dist. Judge Sarah Hughes granted a temporary restraining order Tuesday preventing 15 individu als, banks and companies from selling unregistered securities in a case blossoming into a state wide investigation. The U. S. Securities and Ex change Commission alleged in a civil suit of which the restrain ing order is a part that some of the defendants engaged in “ma nipulative and deceptive” prac tices in the sale of securities. House Speaker Gus Mutscher and two of his top aides ack- nowledgred Tuesday they bought and sold shares of a stock the government alleges was used as an inducement to win passage of a state bank deposit insurance bill which Gov. Preston Smith vetoed. The government alleges in the suit that a plan was put through the Texas Legislature to allow private insuring of state bank deposits. To get the bill passed, the SEC petition claims, “certain legis lators, legislative employes and members of the executive branch” were loaned large amounts of money to buy stock in National Bankers Life. Some of the officials comment ing said they lost money on the stock while others gained. The SEC claimed that Ling and Co., headed by Michael Ling of Dallas, manipulated stock to its and others advantage, citing one life insurance stock selling at $9 a share. The SEC said this was manipulated to $29 a share and now sells at $3. Judge Hughes further ordered the banks and companies named to abstain from “directly or in directly appropriating, dissipat ing, converting or wasting of any funds, securities or other assets or property.” The restraining order will be in effect until Jan. 29, when Judge Hughes is expected to ex tend it. A hearing on the next step, a preliminary injunction, is set for Feb. 8, Judge Hughes said. No date for a full-scale trial was set. It is at that trial that the question of a permanent in junction will be decided. The judge made her decision at an informal hearing attended by about 20 lawyers. No evidence was presented at the Tuesday hearing. Deposited with Judge Hughes was a number of large boxes of documents bearing on the case, including depositions from a large number of persons. Mutscher, aides implicated (continued from page 1) much was sold and how much they still own. They also did not have figures on their profits or losses from the stock. Each of the three House offi cials said they borrowed the money to buy the stock from Sharpstown State Bank. Baum said he and Smith also had bor rowed from Sharpstown to buy the stock. Mutscher said he knew of no influence by any of the defend ants in the SEC suit on behalf of the deposit insurance bill. He declined to elaborate on what motivated him to buy the stock, other than to say he had indications it would increase in value. Shannon said he bought about 4,000 shares less than six months later at 20. Where did he learn of the stock? “Just through my association with the speaker, Sonny Schulte, a speaker’s aide and Rush Mc- Ginty,” Shannon replied. “Rush and Gus and some of the people around here are deal ing and buying and selling stocks all the time,” Shannon added. He said he was unaware of any attempt to use the insurance stock to get the bill passed. “If I had been aware of it, I would not have had any part in it. I would not have been involv ed in any way,” Shannon said. In another Austin develop ment, the State Securities Board said the SEC had kept it inform ed on matters under investiga tion which appeared to be with in the state agency’s jurisdiction. These included “the alleged mis conduct of certain licensed secur ities dealers and their registered representatives.” “We are conducting a thor ough examination into those cases and expect that administrative proceedings and possibly other proceedings will follow in the near future with regard to any material misconduct documented in the course of our investiga tions and examinations,” the board said. National Bankers Life’s most recent report dated Dec. 31, 1969, to the State Insurance Board 1 shows Osorio as president. Sharp is shown as board chair man. The Sharpstown Realty Co. —another defendant in the SEC suit—controls 54 per cent of the company, the 1969 statement said. Several persons with the same name as defendants in the SEC suit also are listed as officers or directors of the insurance com pany, including Sam Stock, sec retary, and director Joseph P. Novotny. AM State Insurance Board source said former Gov. Allan Shivers controlled the company at one time. Osorio was one of Shivers’ aides when he was gov ernor. The source said National Bank ers Life was last examined by the insurance department in 1967 and was now under examination. He said he did not know why the examination was being made, although it appeared to be time for a routine check. National Bankers Life was scrutinized by a Senate investi gating committee in the late 1950s. The committee conducted hearings into certain alleged transactions between certain of ficials of National Bankers Life and insurance promoter Benjack BJ Cage, who fled to Brazil and never was extradited. The com mittee found that Cage nego tiated unsuccessfully for control of National Bankers Life. ©IBSON’S iMTl* 1402 Texas Ave. College Station, Texas STORE HOURS: MON. thru SAT. — 9 A. M. - 9 P. M. SUNDAY — 1 P. M. TO 6 P. M. OREO COOKIES 15-Oz. 2 For 79 C CHIP A HOY COOKIES 2 By Nabisco 14-Oz. For 79C or Mix or Match ■a No. 606 SHAKESPEARE Electric Motor HNG MOTOR $63.89 ELECTRIC FISHING MOTOR • Three Speed Forward • Three Speed Reverse Reg. $74.95 Now Some of the lawyers sought to obtain copies of the documents, but were unable to do so im mediately. The SEC said the investigation began with a routine broker- dealer registration check of Ling and Co., a broker firm operated by Michael F. Ling, one of the defendants. Ling's broker-dealer registration was revoked Jan. 14 and he was suspended from op erating for 90 days. Frank W. Sharp, a Houston builder, developer and financier, was one individual against whom the suit was directed. One of those named was Wag goner Carr, a former Texas House Speaker. He denied any wrongdoing in connection with the case. “Recently I have been associ ated with various businesses in which a lot of well known busi ness men were involved,” Carr said. “There were many trans actions carried on over which I had no knowledge or control. “I was personally not involved in any stock trading in the com panies mentioned in the com plaint. I am sure the hearing will bear this out.” In its complaint the SEC al leges the defendants engaged in a scheme to defraud and mis represented material facts and omitted to state other material facts in the purchase and sale of stock in National Bankers Life Insurance Co. and Master Con trol, Inc., both of Dallas, and Olympic Life Insurance Co. of Fort Worth — three of the com panies named in the suit. Other individual defendants listed in the suit are J. Quincy Adams, Joseph P. Novotny, Tom Max Thomas, Sam Stock, Michael F. Ling, Donald S. Akins, Philip I. Proctor, William B. Strange, James Farha, David Hoover, Audy Byram and J. S. McCain, all of Dallas; and John Osorio of Austin and Frank W. Sharp of Houston. Companies against whom the injunction also was obtained are Employes Retirement Plan, Nash- wood Corp., Flap, Inc., South At lantic Co., Dallas Bank & Trust Co. and City Bank & Trust Co., all of Dallas; and Sharpstown Realty Co., Oak Forest Invest ment Co. and Sharpstown State Bank, all of Houston. In its petition the SEC alleges the defendants were aware of misleading and concealment tac- tices in dealings in stock of Na tional Bankers Life, Olympic Life and Master Control, that they knew the stock was unregistered and that assets were made to appear greater by switching one firm's assets to another when one company was under scrutiny. It is further alleged by the SEC that these individuals were loaned large sums of money through which they acquired stock in National Bankers Life Insurance, and the stock then was sold for them at a profit. The suit claims that the Jesuit Fathers of Houston, Inc., oper ators of Strake Jesuit College Preparatory, have been influ enced by Sharp since November of 1967, when, according to the SEC, he “ostensibly” made them a gift of 20,000 shares of stock. Sharp then persuaded the Jesuits to borrow $3 million from Sharpstown State Bank, this sum was loaned to Sharp and has not been repaid, the petition con tinues. The SEC asserts the Jesuit Fathers group was used as a device for obtaining funds from the public by causing it to issue bonds to the public for the stated purpose of building facilities at a Jesuit prep school and retiring the school organization's indebt- ednes. It is alleged that Sharp and others used proceeds from the bond issues instead to manipu late the common stock of National Bankers Life, Master Control and Olympic. House Speaker Mutscher and Rep. Tommy Shannon of Fort Worth, a top aide of the speaker and House sponsor of the deposit insurance bill, both said they had bought stock in National Bankers Life with money borrowed from Sharpstown State Bank in the summer of 1969. Both denied any connection be tween the stock purchase and the passage of the bill in September 1969. Both said they thought there was nothing improper in the stock purchase. “The purchase was strictly from an individual’s initiative and was not correlated with any one else’s efforts ... It was strictly and completely a legal transaction,” Mutscher asserted. “The bill advanced strictly on its own merits,” Mutscher said. He said he thought he bought the stock in July 1969, sold some and still has some. “Much to my regret, it resulted in a bad investment, a loss,” he said, adding that he did profit from sale of some of the stock. Shannon said he bought about 4,000 shares at 11 and sold about 3,500 shares less than six months later at 20. “Ling & Co. of Dallas was the broker, and I got all my billing from them on it. The loan was through Sharpstown State Bank in Houston,” Shannon said. He said he had “heard this was a stock that was likely to increase and there would be an oppor tunity to make some money.” Where did you learn of the stock? “Just through my association with the speaker, Sonny Schulte (a speakers’ aide) and Rush Mc- Ginty (another speaker’s aide),” Shannon replied. Shannon said he thought the SEC suit “is ridiculous as far as any state official is concerned.” He said he sponsored the de posit insurance bill “because I thought it was good for the bank depositors of Texas, and I still think it is good.” Shannon said he was unaware of any dealings like those men tioned in the suit. “If I had been aware of it, I would not have had any part in it. I would not have been in volved in any way,” he said. Lt. Gov. Ben Barnes denied ever owning stock in National Bankers Life. He said nobody ever talked with him about the stock and said he does not even remember the bill. § For all your insurance needs See U. M. Alexander, Jr. ’40 221 S. Main, Bryan 823-0742 State Farm Insurance Companies - Home Offices Bloomington, 111. URGENT ATTENTION SENIORS & GRADS. Make-up pictures for the Aggieland will be made Jan. 20 - Feb. 5. Your cooperation is necessary. This is the last make-up period. i<> qiHWiO' >. Or*!-* WE HONOR BOTH CARDS— W'n i xirw Tuj SPEND YDH MONEV where it does the most good 1 Prices Effective Jan. 20, 21 & 22 Use Gibson Instant Credit No. 5285 COLEMAN ICE CHEST 38 Qt. Rug-ged Polyethylane Outer Shell WON’T • CRACK • CRUSH • CRUMBLE *10 M 1:', FRIDAY ft SATURDAY 11:00 A.M. TO 7:00 P. ONLY H0T00GS S 10*., have a free Pepsi Cola with your hot dog NO UMT Gibson Discount Pharmacy — Pharmacist on Duty 9:00 a. m. to 7:00 p. m., Mon. Thru Sat. MAALOX LIQUID 12-Oz. Compare $1.49 Now Only 77L HIGH POTENCY VITAMINS and MINERALS With Bioflavonoids & Iron 100 Compare A‘l $7.69 Now Only GIBSON VITAMIN “E” 100 International Units Compare Art SH $3.69 Now Only ZESTABS CHEWABLE VITAMINS 130 Tablets Compare Art $3.49 Now Only $2.07 D Sapid- shaVI PALMOUVE RAPID SHAVE 143/4 Oz. Regular Palmolive Rapid Shave, the shaving cream that gives you a close shave and comfort throughout the day. Reg. 89* .. Now HHHHBHHHHHHBMmBHHi 70 PEPSI O H A SPEOAL 3 i 99 6 Pack Carton of King Size Plus Bottle Deposit Qt. Size No Return Bottle JUMBO COLOR PRINTS 16 FROM ALL STANDARD ROLL FILM SIZES PROCESSING BY FOX ONE PRINT FAST 48 HOUR SERVICE ON WEEKENDS PLUS C DEVELOPING EASTMAN KODAK FROM JLj/TlO J. ITJJTlI 1 IVVfJLT/llV ON WEEKDAYS 48 HOUR SERVICE ON KODACHROME AND EKTACHROME Kodachrome or Ektachrome ^ 1 1 20 Ex. Roll Reg. $2.25 .. NOW 36 Ex. Roll Reg. $3.20 .. NOW - ' ; ■■ y. . mmm '.. v .v.\ .v. .v •-..y..