{"id":3254,"date":"2024-11-19T15:18:47","date_gmt":"2024-11-19T21:18:47","guid":{"rendered":"https:\/\/houston-yes.com\/?p=3254"},"modified":"2024-11-19T15:18:48","modified_gmt":"2024-11-19T21:18:48","slug":"the-sharpstown-scandal-of-1971-72-how-texas-officials-committed-fraud-with-securities","status":"publish","type":"post","link":"https:\/\/houston-yes.com\/en\/eternal\/the-sharpstown-scandal-of-1971-72-how-texas-officials-committed-fraud-with-securities","title":{"rendered":"The Sharpstown Scandal of 1971\u201372: How Texas Officials Committed Fraud with Securities"},"content":{"rendered":"\n

One of the most notorious political scandals in Texas occurred between 1971 and 1972 when nearly 20 state officials faced federal charges. This securities fraud involved the highest ranks of the Texas government. The name of the scandal comes from the multicultural Houston neighborhood of Sharpstown. Read more at houston-yes.com<\/a>.<\/p>\n\n\n\n

The Essence of the \u0456candal<\/h2>\n\n\n\n

In 1970, Houston banker, insurance executive, and owner of Sharpstown State Bank and National Bankers Life Insurance Corporation (NBL) Frank Sharp borrowed $600,000 from his bank and loaned it to Texas state officials. In return, these officials bought NBL shares to resell them for a substantial profit, as Sharp had inflated the value of his company beforehand.\u00a0<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Frank Sharp<\/em><\/p>\n\n\n\n

As a result of these machinations, a local Catholic preparatory school for young men, Strake Jesuit College Preparatory, suffered significant losses. The institution lost $6,000,000 and part of its school property. The school bought the resold shares at prices ranging from $20 to $26 each. During this time, Sharp was pushing for legislation that would benefit NBL by increasing the company’s value for investors, namely those officials who would advocate for legislation favorable to him.<\/p>\n\n\n\n

The scheme would have allowed investors to make approximately $250,000 in profits if the U.S. Securities and Exchange Commission (SEC) had not intervened in early 1971. The Commission indicted former state Attorney General Waggoner Carr, Frank Sharp himself, former state insurance commissioner John Osorio and several others.<\/p>\n\n\n\n

According to information from the SEC, the conspiracy was conceived by Sharp himself, who wanted to enact new state legislation on bank deposit insurance that would benefit his financial empire. Sharp provided over $600,000 in the form of loans from Sharpstown State Bank to bribe state officials. With this money, they bought shares in NBL, which would later be resold at a huge profit, as Sharp had overrated the value of his company’s stock. The officials were to receive profits, while Sharp would benefit from favorable laws.<\/p>\n\n\n\n

Outcome  <\/h2>\n\n\n\n

State representatives denied all charges, claiming that they obtained bank loans and made stock purchases solely as business transactions unrelated to Sharp’s bank notes.<\/p>\n\n\n\n

By mid-1971, all state politicians involved in the scheme faced intense political pressure. In particular, the Speaker of the Texas House of Representatives, Gus Mutscher, State Representative Thomas Shannon, and others were accused of bribery to promote favorable legislation through the government.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Gus Mutscher<\/em><\/p>\n\n\n\n

At the end of 1971, the SEC charged Mutscher, and the following year, he was tried in the Texas city of Abilene along with Texas representative Thomas Shannon and assistant Rush McGinty.<\/p>\n\n\n\n

The indictment accused the three men of conspiring to get a bribe from Sharp and District Attorney R. Smith from Austin. The case was entirely based on circumstantial evidence, which created legal nuances that were unclear to laymen. However, the jury took only 140 minutes to find the group guilty on March 15, 1972. They were given a sentence of five years probation. Later, an appeals court acquitted Mutscher, after which he was elected as a circuit judge in Washington County.<\/p>\n\n\n\n

As for Sharp himself, he was sentenced to three years probation and fined $5,000 for violating federal banking laws and securities laws.<\/p>\n\n\n\n

Other officials involved suffered only reputational damage. The Democratic Party primary and the general elections of 1972 led to striking changes in the composition of the legislature. Everyone even remotely associated with the scandal was defeated by other candidates. Public trust in the legislature was somewhat restored when lawmakers approved an amendment in November 1972 that allowed the body to meet as a constitutional convention in 1974.<\/p>\n\n\n\n

The scandal marked the end of the careers of Governor P. Smith and Lieutenant Governor Barnes. Smith facilitated the consideration of legislation favorable to NBL, after which he sold his shares to the company and made a profit of $62,500.<\/p>\n\n\n\n

The ultimate impact of the stock fraud on Texas politics became evident during the legislative session of 1973. The newly enacted legislation required public officials to disclose their sources of income. Candidates for public office had to provide more information about their campaign financing. Additionally, many state documents were made accessible to the general public; requirements for open meetings of government agencies were expanded, among other changes.<\/p>\n\n\n\n

“The Dirty Thirty”<\/h2>\n\n\n\n

Texas House Secretary Dan Cain ironically referred to the 30 members of the legislative body who banded together against Speaker Mutscher and other state officials accused in the scandal as the “Dirty Thirty.” This coalition of 30 included both Democrats and Republicans, as well as conservatives and liberals.<\/p>\n","protected":false},"excerpt":{"rendered":"

One of the most notorious political scandals in Texas occurred between 1971 and 1972 when nearly 20 state officials faced federal charges. This securities fraud involved the highest ranks of the Texas government. The name of the scandal comes from the multicultural Houston neighborhood of Sharpstown. Read more at houston-yes.com. The Essence of the \u0456candal […]<\/p>\n","protected":false},"author":291,"featured_media":2813,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[490],"tags":[1486,1478,1483,1479,1484,1481,1487,1480,1482,1485],"motype":[491],"moformat":[89],"moimportance":[104],"class_list":{"0":"post-3254","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-pro-polituky","8":"tag-political-corruption-texas","9":"tag-sharpstown-banking-scandal","10":"tag-sharpstown-bribery-scandal","11":"tag-sharpstown-financial-scandal","12":"tag-sharpstown-fraud-investigation","13":"tag-sharpstown-scandal-1971-72","14":"tag-sharpstown-scandal-history","15":"tag-sharpstown-stock-scheme","16":"tag-texas-officials-securities-fraud","17":"tag-texas-securities-fraud","18":"motype-eternal","19":"moformat-vlasna","20":"moimportance-retranslyacziya-v-agregatory"},"_links":{"self":[{"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/posts\/3254","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/users\/291"}],"replies":[{"embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/comments?post=3254"}],"version-history":[{"count":1,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/posts\/3254\/revisions"}],"predecessor-version":[{"id":3255,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/posts\/3254\/revisions\/3255"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/media\/2813"}],"wp:attachment":[{"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/media?parent=3254"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/categories?post=3254"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/tags?post=3254"},{"taxonomy":"motype","embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/motype?post=3254"},{"taxonomy":"moformat","embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/moformat?post=3254"},{"taxonomy":"moimportance","embeddable":true,"href":"https:\/\/houston-yes.com\/en\/wp-json\/wp\/v2\/moimportance?post=3254"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}