By Camilo Smith
By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
"I married into a real estate family," says Ballis. "He basically taught me the real estate business. And I learned a lot -- mainly about borrowing money."
With Reed's help, Ballis began putting together legitimate land deals and construction projects all over Houston: a multimillion-dollar shopping center along upper Westheimer; another near the future site of the fashionable subdivision of Cinco Ranch. Ballis bought a home in Memorial and built another in Acapulco. Life was good. And for most people, it would have been enough.
In the 1980s, a certain segment of Houston believed real estate could cure all your financial maladies: If you waited, the value of your land would go up -- and go up fast enough -- for you to outrun the financial indiscretions that allowed you to buy it.
John Ballis was a dedicated practitioner of the philosophy. He borrowed as much money and bought as much land as he could in hopes of either working a multimillion-dollar land deal or flipping the land for enough profit to pay the note. And in Roy Dailey, the president of First Savings Association of East Texas, Ballis found his dream lender.
"Dailey didn't really care who he loaned money to," says Ballis -- especially if the borrower was willing to kick back part of the loan to Dailey. According to federal investigators, from March through December 1984, Dailey arranged for First Savings to make Ballis $21.3 million in construction and real estate loans.
Actually, the loans were to a handful of Ballis's old and dear friends. Federal banking and lending regulations limited how much money a financial institution could lend an individual borrower, but Ballis and Dailey weren't about to let that technicality stand in their way. Ballis's pals -- the "straw borrowers" -- could be trusted to funnel the money back to him.
"Dailey just said, 'Bring in the people, and we'll make the loan,' " recalls Ballis. "We shouldn't have done it. But there was a lot of that going on back then, so there wasn't much thought given to it."
In January 1985, Ballis paid Dailey $371,000 for his services. A portion of that -- $71,000 -- was rendered in cashier's checks. But Dailey wanted cash, and so the majority was delivered in a far more ostentatious manner. According to Ballis, he had deposited $1.8 million of the money that Dailey had loaned one of Ballis's straw borrowers at the First State Bank of Liberty. Ballis called his friend, bank vice president Suzanne Fairchild, and had her withdraw $300,000 from the account, stuff the cash in a duffel bag, drive it to Liberty Airport and hand it over to his friend John Adger. Adger, who had gone to Liberty on other business, then boarded a helicopter and flew the money back to Houston, where he hand-delivered it to Dailey.
Dailey wasn't the only party willing to cut shady deals with Ballis. In 1985, Ballis owned 210 acres of vacant land in the precinct of then-Harris County Commissioner Bob Eckels. At the time, there was more construction under way in Eckels's district than in some small states, and the building spree was leading to problems with rainwater runoff, and potentially, flooding. To solve the problem, Eckels wanted the county to build flood-control retention ponds on Ballis's land.
If the deal went through, Ballis stood to make close to $30 million -- money he desperately needed to pay outstanding loans. He later told county authorities that to grease the wheels, he paid the commissioner a $1-million bribe. (By the time Ballis made the allegation, Eckels was dead.)
For a while, it looked like his bribe had worked -- but then the deal began to sour. Terry O'Rourke, then an assistant county attorney, was helping investigate County Judge Jon Lindsay. According to O'Rourke, Eckels was locked in a power struggle with Lindsay, who preferred other projects. And after Eckels was indicted for receiving an illegal gift unrelated to Ballis, his influence on the court diminished further. In 1987, the county commissioners voted to back out of the retention-pond deal, leaving the developer with notes he couldn't pay. When that happened, says O'Rourke, Ballis blamed Lindsay. And in 1993, he saw an opportunity for revenge.
Following his conviction on bank fraud charges that September, Ballis was sitting on a bench waiting to talk with a sentencing investigator when he struck up a conversation with one Billy Wayne Chester, who was there for the same reason. According to O'Rourke, during the course of their conversation, Chester told Ballis that he had proof that Lindsay had accepted a kickback for running a county road through northwest Harris County property owned by an associate of Chester's. Ballis told Chester he could help him if Chester would take his information to the county attorney; Chester agreed.
"Ballis called [Harris County Attorney Mike] Driscoll and said he could prove that Lindsay got $100,000 for putting a road through a swamp," recalls O'Rourke. "I was assigned to look into it."
In December 1993, the county attorney filed a lawsuit to remove Lindsay from office, based on Chester's allegations. The county judge denied the bribery allegations but didn't seek re-election, and his term as county judge expired before the lawsuit to remove him could be tried. Lindsay was never prosecuted and was later elected as a state senator.