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Thrifty prosecution: country lawyer turned U.S. attorney sets his sights on savings & loan fraud.

Thrifty Prosecution

Three years ago, Charles A. (Chuck) Banks was a country lawyer in Mississippi County. Some of the state's poorest people were his clients in murder and personal injury cases.

Now as then, the east Arkansas native is a Republican and so loyal to the GOP that he became a sacrificial 1st Congressional District candidate in 1982. Banks lost to Bill Alexander, the Democratic incumbent re-elected to an eight term by 65 percent of the votes cast.

In November 1987, President Reagan rewarded Banks for waving the Republican banner and building a respectable legal reputation. His prize was the post of chief federal attorney for 41 counties making up the Eastern District of Arkansas. It pays $81,500 a year.

With a $2 million annual budget, 18 assistant U.S. attorneys and a clerical staff of 26, Banks represents the federal government in foreclosures and civil matters. He also prosecutes bank robbers, drug dealers, corrupt public officials, Social Security cheats, interstate auto thieves, and defendants charged with mail, bank and savings and loan fraud.

Prosecution of S&L fraud in Arkansas began before Banks took office, and he says he initially underestimated the speed with which it takes his office to wade through the many allegations and hundreds of financial transactions to decide whether criminal charges are warranted.

"I've been overly optimistic about the amount of time it would take to put the savings and loan issue behind us," he says.

Banks describes the investigation of thrifts as "complicated, labor-intensive and tedious."

After a recent meeting in Washington of U.S. attorneys with President George Bush and Attorney General Richard L. Thornburg, Banks says, "despite the obstacles of these type cases, the president made it extremely clear, they are going to take top priority."

The U.S. attorney estimates that 40 to 50 percent of the money budgeted in his office for white-collar investigation goes to prosecuting savings and loan fraud.

Additional Resources

Banks recently received an allocation for two additional attorneys and $49,000 more to be used specifically in investigation of the state's failed thrifts.

He feels Washington has been generous in staffing and its budget allowance. Unless there is a dramatic increase in his S&L investigation workload, "I'm going to make do with what I have," he says.

Two assistant U.S. attorneys work on S&L cases full time, and three other attorneys work on them primarily, while also occasionally pursuing other types of cases.

"I have not necessarily embraced the notion that you need a massive task force to present an indictment or basis for a crime," Banks says. "Taxpayers will never be served in the Eastern District unless we simplify and narrow the focus of what we're looking at."

(See page 34 for list of S&L related crimes and cases prosecuted or pending in Arkansas over the past five years.)

Whether meeting visitors in his office or mixing with Hillcrest residents during his neighborhood's Fourth of July festivities, Banks, 43, wears a broad smile and good-natured friendliness.

He's a busy man who tries to answer a journalist's questions and balance the public's right to know how he's spending its money with the need to guard against pre-trial publicity that may hurt his chances at winning a case. Consequently, he declines to discuss specifics about pending cases or investigations.

As for completed cases, he will not discuss their particulars because he says he wants to concentrate on what's happening in current cases and not second guess what has occurred.

Processing Cases

Prosecution of S&L officials involves a method that is different from that followed in other cases. Unlike bank robberies, drug trafficking and embezzlement, there may not be any tangible fruits of crime.

Savings and loan fraud may involve executives or borrowers who benefit financially, but to a large degree it involves the violation of federal regulations which ensure the stability of thrifts and the proper handling of depositors' money.

In fraudulent transactions, S&L executives may have sought to enrich their institutions and benefit indirectly rather than try to directly pocket extra money through bribes or kickbacks.

The most difficult part of the investigations is to determine if banking transactions were imprudent or stupid as opposed to fraudulent and/or fueled by greed and deceit.

"We're not here to indict people just because they were affiliated with a savings and loan," Banks says.

"We have to simplify and go to the heart of these matters and zero in on wrongdoing and not be distracted with hundreds of transactions where there may not have been anything wrong. We cannot examine every financial transaction an institution engages in just because there are allegations of crime in its demise."

Facing mounds of paperwork to be analyze in each case, he says, "I don't know how to phrase it any better than this: You don't want to be guilty of not being able to see the forest for the trees."

Sources Of Failure

Savings and loan failures can be rooted in laws providing for deregulation of the institutions and real estate tax shelters. Thrifts took advantage of the favorable legal climate and were not closely watched until the economy went bust with depressed oil prices and declining real estate prices in areas that became overbuilt.

The wave of problems began to show up in the late 1980s and resulted in the failure of 15 Arkansas savings and loans so far, while many of the other 19 thrifts are teetering toward insolvency, according to federal officials.

Over the past three years, there have been nine cases of S&L fraud. Eight were handled by Banks' office and one by the office of J. Michael (Mike) Fitzhugh, U.S. attorney for the Western District, based at Fort Smith. (See page 34 for list of S&L cases.)

Eight of the cases have benn disposed of, and one case is set for trial at Pine Bluff in October. The nine cases involve 12 defendants, eight of whom either pleaded guilty or were found guilty by a jury. Three defendants were acquitted.

Banks' office has the chore of deciding whether thrift executives were trying to dig their way out of bad deals out of ignorance or behaving with reckless disregard for their customers' money out of fraud. The real burden is to prove to a jury that criminal intent was the motivation behind transactions.

The statute of limitations on bringing S&L cases to prosecution was five years, but last August, Congress extended them five years. As a result, violations committed as far back as August 1984 can be prosecuted until August 1994. The limit for current violations also was broadened to 10 years.

It sounds like a lot of time in which to sift through allegations, but Banks says once involved in the investigations, it doesn't seem like much time at all.

Witnesses in the cases are difficult to find because at the very least they may be embarrased when their actions are criticized as imprudent. At the most, potential witnesses may be drawn into the cases as participants in a conspiracy.

Roots In Farming

Banks' family's heritage is in farming the Delta. His parents and a brother still plant about 1,650 acres in cotton, wheat and soybeans in southern Mississippi County.

Before he became U.S. attorney, he had never seen anything like the problems facing him in investigating savings and loans.

After graduating from the University of Arkansas School of Law in 1973, he servgd briefly as an assistant Arkansas attorng general. He then became a Mississippi Coulty public defender, deputy prosecuting attorney for Blytheville and Osceola and later served 12 years in private practice before taking his current job.

If he does well in his current term, he plans to seek another four years as U.S. attorney.

Asked about what was the easiest thing in pursuing S&L fraud, Banks says, "I haven't found anything easy about the investigations - not one thing."
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Title Annotation:Charles A. Banks
Author:Kern, David F.
Publication:Arkansas Business
Date:Jul 16, 1990
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