By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Ben DuBose
Ballis, though, wouldn't be so lucky. At least some of his crimes would catch up with him.
Not long after Ballis had the $300,000 delivered to Roy Dailey via helicopter, the S&L president's questionable lending techniques came to the attention of federal authorities. Employees at First Savings of East Texas had noticed Dailey carrying large amounts of cash in a shoe box shortly after the $1.8-million loan went through. But federal agents didn't know where he was getting the money.
By 1988, Ballis was no stranger to federal authorities, who were also investigating his involvement with the failure of a couple of north Texas savings and loans. Ballis realized he was on the verge of being indicted for making kickbacks to Dailey, but he also knew that the government couldn't make a case against Dailey without his cooperation.
Attorneys at the Justice Department agreed to cut a deal. In exchange for his full disclosure about Dailey, Ballis was allowed to plead guilty to the relatively minor charge of making a false statement on a loan application. In January 1990, Ballis was sentenced to two years' probation and 160 hours of community service. Eleven months later, largely on the strength of Ballis's testimony, Dailey was convicted of bank fraud and sentenced to 12 years in prison. Ballis seemed to have gotten off lightly.
But two months after finishing his probation, he was indicted for the very crimes for which he'd previously received immunity from prosecution. More than two years after agreeing to his plea-bargain arrangement, federal prosecutors charged that Ballis had not been completely honest with them about his dealings with Dailey.
The question of whether Ballis was wronged hinges on the details of his interrogation by the FBI. For two consecutive days in July 1988, two agents and an assistant U.S. attorney questioned him about his kickbacks to Roy Dailey.
The meetings were held in the plush offices of Ballis's lawyer, Thomas Royce. During his legal career, Royce had counseled numerous defendants during similar interrogations. But this meeting, he recalls, was one of the strangest -- rambling, disjointed and out of focus. "Every time John tried to explain something to them," remembers Royce, "they'd say, 'Let's get back to that later.' " Ballis was completely candid with the investigators, says Royce -- at least to the degree that they allowed him to be.
Ballis told the investigators about the straw borrowers and how he had had the duffel bag of cash flown from Liberty to Houston. But he failed to mention that Suzanne Fairchild had covered up the withdrawal on the bank's daily ledger by creating a fake certificate of deposit for the same amount. Nor did he disclose that he'd loaned Dailey an additional $200,000.
After Ballis revealed that he'd paid Dailey in cash, says Royce, one of the FBI agents began pounding his fist on the desk and yelling that Fairchild had lied to him. At that point, maintains Royce, the feds must have realized that the $300,000 CD was a fake. And even if they didn't, he says, they never asked.
(Ballis now says Royce was aware of Fairchild's cover-up and should have notified the feds. Royce denies the charge, and investigators say there is no evidence of the attorney's wrongdoing.)
As for what Ballis contends was a $200,000 loan to Dailey, Royce says Ballis had no motive to lie, since he'd already been granted immunity; Royce believes Ballis simply didn't get a chance to mention the loan. But after the government found out about it, the prosecutors may have thought Ballis believed them too stupid to discover it on their own.
Ballis, says Royce, hadn't improved matters by being overbearing and condescending, and by his previous attempts to better the more-than-generous deal offered to him. He irritated the feds, and Royce believes he did it at the worst possible time: at a point when the S&L crisis was starting to generate headlines, and when federal prosecutors had been able to make precious few cases and wanted to send someone to jail. Royce conjectures that the feds hatched a plan to get even with Ballis -- or at the very least, they intended to trick him.
The Bob Casey United States Courthouse in downtown Houston is a dreary piece of prison-like architecture that seems to foreshadow the fate of many defendants who appear there. On the second day of 1990, the day that Ballis would plead guilty, Tom Royce arrived early to discuss Ballis's plea agreement with his old friend John Patrick Smith, head of the fraud division of the local U.S. Attorney's office.
For several months, Royce had battled assistant U.S. attorney Mitchell Lansden over the exact wording of Ballis's plea. After finally settling on the semantics, Royce still had a feeling that Lansden was up to something. Smith confirmed his fears.
"John Smith is an honest guy," says Royce. "He wouldn't say how, but he told me that Mitchell was going to trick me."
Royce guessed that Lansden would use the sentencing portion of Ballis's hearing to bring up his history of unpaid loans -- a ploy that could lead to prison time. But Lansden had something else in mind.