Sharpstown scandal
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The Sharpstown scandal was a stock fraud scandal in the state of Texas in 1971 and 1972 involving the highest levels of the state government. It involved the Sharpstown area of Houston.
The scandal revolved around Houston banker and insurance company manager Frank Sharp and his companies, the Sharpstown State Bank and the National Bankers Life Insurance Corporation. Sharp granted US $600,000 in loans from his bank to state officials who would, in turn, purchase stock in National Bankers Life, to be resold later at a huge profit after Sharp artificially inflated the company's value. Using the sales as encouragement, Sharp pushed for legislation that would benefit Sharp's insurance company, increasing the value of the company to its investors, the very people who helped to push the legislation through.
The scheme did succeed in generating profits for the investors on the order of a quarter of a million dollars, but the SEC stepped in early in 1971, filing criminal and civil charges against former state attorney general Waggoner Carr, former state insurance commissioner John Osorio, Frank Sharp, and a number of others. By the middle of 1971, anyone in the state government who might be connected to Sharp was heavily pressured politically. Allegations of bribery to push the favorable bills through the government spread to House Speaker Gus Mutcher, Jr., State Representative Tommy Shannon, state Democratic chairman and state banking board member Elmer Baum, and even Governor Preston Smith.
Mutscher, Shannon and Rush McGinty (one of Mutscher's aides) were indicted by the SEC in late 1971 and tried in Abilene in 1972. The three were indicted for conspiracy to accept a bribe from Sharp and found guilty in March, and sentenced to five years' probation. Sharp was also found guilty of violating federal banking and securities laws and was sentenced to three years' probation and a $5,000 fine. But the damage had already been done to the Democratic politicians: 1972 was an election year and everyone who was remotely connected to the scandal were defeated by more moderate Democrats, Republicans or other reform candidates. Governor Smith failed to be elected to a third term and was defeated in the primaries by businessman Dolph Briscoe of Uvalde, who went on to succeed Smith as governor of Texas.
In 1973, lawmakers passed a series of reforms that required state officials to disclose their sources of income and campaign finance contributions, and passed a number of other reforms designed to require full disclosure by state politicians.
See also
External link
- Handbook of Texas Online: The Sharpstown Stock Fraud Scandal (http://www.tsha.utexas.edu/handbook/online/articles/view/SS/mqs1.html)