By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Ben DuBose
It's not clear when the uncertainty began to gnaw at Wayne Melson, but he knew when the federal government showed up that any assurances were null and void.
Melson was in London that first week of August 1997, when a van-load of feds from the U.S. Marshals Service came to the offices of Winterhawk West Indies, Ltd. on NASA Road 1 in Seabrook and started emptying file cabinets and boxing up the contents. Melson was an associate financial consultant for Winterhawk, which specialized in high-yield investment programs, mostly overseas. The company was owned by his friend, Robert Cord, who had convinced Melson to abandon a 22-year career in law enforcement for the opportunity to play international high finance.
It wasn't a particularly hard sell for Cord, though perhaps it should have been. Wayne Melson had been a cop all his life, from the military police to the force at Deer Park, where he was a patrol supervisor and Swat Team leader. While police work won't make anyone rich -- Melson's yearly salary had peaked in the mid-$50,000 range -- he and his wife, Debbie, who sold commercial real estate for a Re/Max franchise in Seabrook, lived comfortably.
Debbie had actually been the one to introduce her husband to Robert Cord, who at one point in his life wanted to be a preacher. He even studied at a Southern Baptist seminary and became an ordained minister. Cord never had his own church, at least not in the physical sense. But he knew how to make money, which eventually became Robert Cord's unique ministry. In the temple of Robert Cord, riches were not regarded within the usual context of power and status. The accumulation of capital was one-half of a single prayer; the other half was a plea that the needs of others someday be fulfilled.
Cord knew the Melsons shared his Christian principles. They were among the first people he befriended after moving to the Pasadena area in the summer of 1996. Wayne and Debbie were members of Sagemont Baptist Church, and they had recommended Cord for membership .
In late November 1996, Cord started looking for someone to run the day-to-day operations of his investment business, Winterhawk West Indies. He paid a visit to the Melsons' home one evening and offered the job to Wayne, even though the police officer had no training or experience handling other people's money. And despite Cord's attempts to explain it, Melson could manage only a crude understanding of how the Winterhawk investments were supposed to work.
Had someone else made such an offer, Melson might have politely turned it down. But, when Robert Cord bowed his head, thanked Jesus Christ for good friends, then asked God for His blessing and guidance, Wayne and Debbie prayed right along with him.
At approximately the same moment U.S. marshals were shutting down Winterhawk West Indies and seizing its records, the U.S. Attorney's office in Houston was laying claim to almost $2.1 million in the Winterhawk accounts at Texas Coastal Bank.
The government told the bank's president, Billy Holcomb, that the money in at least a half-dozen Texas Coastal accounts opened by Robert Cord belonged to people from Kemah to Melbourne. The government told Billy Holcomb that Cord had promised enormous returns on their investments, but never delivered. Instead, Cord had used the investors' money to buy houses, cars, boats and real estate for himself and others. Worse, Robert Cord coaxed investments from people by telling them their principal was guaranteed by a surety bond or certified gold certificates. He had been telling people that for at least a year, the government said, and had collected $5 million before someone figured out he was lying.
At the time, Billy Holcomb didn't tell the government that, after Robert Cord opened his first Winterhawk account in August 1996, the banker had spoken to many of those same people. At the time, Holcomb didn't really know what to say, especially when the government told him they were pretty sure Robert Cord didn't even exist.
"Well," Holcomb managed to ask, "who is he then?"
"We don't know," the government replied. "Yet."
This is the version of Robert Cord's life that Wayne Melson and Billy Holcomb, among others, have heard: He was born December 12, 1954, in Fort Stockton. He joined the Army at age 17, stayed for six years, then became a district manager for Denny's Restaurants. That lasted about a year before Cord went to work for the government as an international banking and trade consultant. Cord said the government gig was actually with the CIA, and the way he explained the fancy title, he was a bagman: When Congress wouldn't give the agency money for an intelligence operation, Cord would find a few high-yield investments that could generate large sums of cash quickly. Though he never discussed it much, Cord felt burned by his government and quit its service in 1989. He told Wayne Melson he had "given up" his social security number in protest.
In 1990, Cord went into business for himself as a financial consultant. He never married, though it was not for lack of effort. Apparently, Cord was passing through Channelview when he met and fell in love with the daughter of a truck stop owner named Tinsley. In June 1996, Cord professed his undying devotion to Karisa Tinsley, then hired her as a project manager for his new investment firm, First Federal Assurance.
Karisa, who was only about 25 years old, never reciprocated Cord's attention, though she did allow him to buy her a house, a car and some jet skis. Later, Cord gave Karisa's daddy the money to start a trucking company that eventually failed. Though unrequited, Cord's love persevered, and he took to wearing a gold band on the ring finger of his left hand, a symbol of God's wish that Karisa become his wife.
Cord's destiny took an abrupt turn west in mid-August 1996, when his banker, Ronnie Wardwell, vice president of Community Bank & Trust's Vidor branch, said he didn't want First Federal's business anymore. When Cord asked why, Wardwell said he had never encountered the kind of trading programs First Federal offered, and in light of the large sums of money being wired into the account -- the banker had just verified a $334,000 transfer from two out-of-state investors -- he didn't like the smell.
Cord didn't make a fuss, nor did he close out his Community Bank accounts until much later. But, after his conversation with Ronnie Wardwell, Cord immediately moved $200,000 into an account at Texas Coastal Bank in Pasadena,where, as someone would later put it, he "received much more understanding treatment" from Billy Holcomb.
Cord opened the Winterhawk West Indies office on NASA Road 1 on January 9, 1997, with a staff of two: a secretary and Wayne Melson, whose title was associate financial consultant.
Of course, Melson wasn't expected to do much actual consulting. Cord traveled a lot, looking to buy, sell or trade any financial instrument that would produce a return. So Melson spent the majority of his time on the phone, reassuring people who had invested, or were thinking of investing, anywhere from $100,000 to $500,000 with Robert Cord.
Maybe it occurred to Wayne Melson at some point that his job wasn't that much different from being a cop, at least in the way that the presence of a police officer increases everyone's comfort level in certain situations.
Working for Winterhawk certainly paid better than the Deer Park Police Department. Before long, Melson was driving a dark blue BMW convertible and making six times as much money as he did as a patrol supervisor and Swat Team leader. He learned, too -- or at least tried to learn -- how a sum of money, say, $183,000 or $250,000, can be invested overseas and, a short amount of time later, come back as a much larger sum. It was a complicated business. But although Wayne Melson was in no way qualified to be an "associate financial consultant," he was not a stupid man.
Neither was Billy Holcomb, which raises a few questions about what the president of Texas Coastal Bank was thinking when he started doing business with Robert Cord in August 1996. For example: Did Billy Holcomb, as the board of governors of the Federal Reserve System recommends, "know his customer?"
Holcomb didn't make the standard "hand-off" phone call to Community Bank's Ronnie Wardwell until one week after Cord opened his Texas Coastal account with a $200,000 wire transfer. As it turned out, Wardwell told Holcomb that he'd grown antsy about the type of activity taking place in Cord's Community Bank account. Wardwell said large sums of money were always coming in and going out. Often the balance would drift down to nothing before another deposit came in.
At one point, Wardwell told Holcomb, Cord wanted a loan. Wardwell needed financial statements, but Cord never provided them; nor did he ever inquire again about a loan. Wardwell told Holcomb he finally asked Robert Cord to move his accounts to another bank.
Despite Ronnie Wardwell's concerns, Holcomb didn't get all jammed up when Cord's social security number didn't check out. When asked about it, Cord said he'd mistakenly provided his taxpayer identification number and gave the banker another nine digits. Holcomb apparently didn't bother to verify the new number: Cord later said he made it up on the spot.
Holcomb did have Fred Taylor do some checking up on Cord. Taylor worked for the county constable, and was the security guard at Texas Coastal Bank. Holcomb had his security guard run Cord's name through a couple of law-enforcement computers, which, to the banker's apparent satisfaction, turned up nothing.
In his mind, Billy Holcomb was satisfied that Robert Cord was a legitimate businessman. He even agreed to take phone calls from Winterhawk's prospective investors, who had been told by Cord that, if it made wiring $100,000 to Texas Coastal Bank any easier, they should call the bank's president. Apparently, many of them did.
There is currently some discrepancy among interested parties -- specifically, lawyers for Holcomb and Texas Coastal Bank on one side and, on the other, about a dozen investors who claim the Winterhawk assets seized by the government belong to them -- over what exactly Billy Holcomb told the investors who called. The investors say Holcomb enthusiastically recommended an investment with Cord. These investors recall Holcomb telling them that Robert Cord was not just a good businessman, who kept his accounts in order and secured significant returns for his clients, but a person of high integrity.
Holcomb has argued that he never offered such an endorsement, and that any illegal activity conducted by Robert Cord was carried out without the banker's knowledge. If, as the government claimed, Cord had duped investors, he'd duped Texas Coastal too; the bank had no way of knowing what Cord was really doing, Holcomb said, and neither did the bank president.
But Billy Holcomb did have a unique relationship with Robert Cord. The banker and his wife, Dorothy, owned Re/Max Gulf Coast, where, shortly after arriving from Beaumont in the summer of 1996, Cord began to look for real estate investments. Cord asked Dorothy to broker the purchase of a huge tract of land in north Houston by an investor group that wanted to build a Winston Cup auto-racing track. The deal fell through, but by then Cord had become a steady client of Re/Max Gulf Coast. From there, it didn't take much effort for the easy-going, scripture-quoting Robert Cord to befriend the Holcombs, as well as Wayne and Debbie Melson, who worked for Dorothy at Re/Max Gulf Coast.
Over the years, the Melsons and the Holcombs had themselves established a comfortable friendship. Debbie and Dot, as Dorothy was called, had the real estate business to talk about; Wayne and Billy liked to swap fishing stories. Each week, they attended Sagemont Southern Baptist Church together.
Like the Melsons, the Holcombs considered Robert Cord an honorable man. Cord was different, less stuffy and more amiable than most of the local swells Billy and Dorothy had come to know. He drove an expensive car, but his physical presence was unassuming. Cord was about 5'8", and at about 180 pounds, a little paunchy. He often wore a baseball cap and jeans. Cord told his new friends that he had been in the Special Forces, a Green Beret, before dedicating his life to acts of Christian goodwill.
Indeed, Robert Cord's abiding faith in God's generosity touched both the Melsons and the Holcombs on a personal level, but Billy in particular. At the time, Billy Holcomb had been president and chief executive officer of Texas Coastal for 12 years. It was a family-owned institution, small and not likely to get appreciably bigger. Holcomb always figured it would do until retirement, when he could concentrate on his real estate business.
But when Robert Cord opened his Winterhawk accounts, and the investments started coming in, Billy began to think differently, beyond Texas Coastal Bank, beyond Pasadena. Cord suggested they start their own bank. Billy rather liked the sound of that, so in January 1997, around the time Winterhawk West Indies opened its Seabrook office, Holcomb started on a business plan for the new bank, which Cord said should be named Belize City International.
No doubt Billy Holcomb never told the Winterhawk investors who called that he was planning to open an offshore bank with Robert Cord. Nor did he mention that Winterhawk funds were used to pay him a $25,000 consulting fee for his work on the business plan. Holcomb also took three all-expense-paid trips to Belize with Cord, who, on one jaunt to the sleepy Central American country, used Winterhawk funds to bring Dorothy and her stepdaughter Toni along.
Moreover, Billy and Dorothy Holcomb were themselves Winterhawk investors. According to Winterhawk records kept by Wayne Melson, Billy invested $25,000 in November 1996. In April 1997, Dorothy Holcomb withdrew $150,000 from the Re/Max Gulf Coast escrow account at her husband's bank and gave it to Melson, who put up $50,000 of his Winterhawk commissions. His friends, Rusty and Brenda Hellyer, put up another $50,000, and Debbie Melson solicited $250,000 from her friend, Dr. Donald Metz. Melson wired the pot --an even $500,000 -- to a bank in West Yorkshire, England.
Maybe no one understood the details of the transaction -- whether the money would be used to trade paper, secure a line of credit or leverage a surety bond. But, the way Melson figured it, Cord's more sophisticated investors had to know what they were doing, and they were depositing money in Winterhawk's account for those kinds of deals all the time. Never mind that, after four months at Winterhawk, Wayne Melson had never seen an investment pay off. Robert Cord always said it was simply a matter of finding the right financial instrument. Sometimes it takes a while, he'd say, but once it's done, the returns come quickly.
So, that's what Wayne Melson told his friends, who had pooled together a half-million cash investment with the understanding that over the next 30 days, it would turn into a check for $1.5 million.
Bob and Shirley Harkins believe in miracles, but unlike most seekers of the truth, they are utterly dependent on them. For years, the Harkinses have wanted to open a residential crisis-pregnancy center, a Christian home for guidance-hungry young women unsure of their next move. The Harkinses had even opened their own home to provide a limited, and rather cramped, refuge.
But God wanted Bob and Shirley to do more, so they started praying for a 5,000-square-foot house, preferably in Montgomery County. In January 1997, the Harkinses were weighing an offer from a friend, Michelle Crawford, who wanted to make a gift of the home in Clear Lake that her new boyfriend was buying her. But Bob and Shirley wanted to remain close to their church, the Tribe of Judah, so they asked Crawford if she'd sell her new place and donate the proceeds to them. Crawford rejected the offer, but suggested that Bob and Shirley meet with her boyfriend, who, she gushed, was always willing to use his wealth to encourage the good works of others.
Shirley Harkins remembers Robert Cord as a calm, gracious man. He arrived at Crawford's home on January 15, 1997, neatly dressed. He'd heard about the Harkinses' ministry from Michelle Crawford, he said. Like her, he believed in its purpose and knew God would make it happen. At dinner, Cord said a prayer for the Harkinses. Later, he prayed before talking about how his investment strategies might be used to save the lives of unborn children.
Cord told the Harkinses that Winterhawk West Indies pooled funds from investors to buy a $10 million surety bond, which was used to insure certified gold reserves from the mining operation Cord owned near Henderson, Nevada. The gold certificates secured a line of credit that was then "placed in trade" overseas. About four weeks later, investors would start receiving the returns in monthly disbursements. In one year, a $200,000 investment in the "bond program," as Cord called it, could generate more than $1 million, plus the principal.
Cord also described a similar "cash program," as well as an investment in certificates of deposit that earned up to 12 percent per year. Bob and Shirley, their heads reeling from a whistle-stop tour of a world they had no idea even existed, told Cord to save his breath. We have no money to invest, they said.
To which Cord replied: "Pray, and the money will be there."
By mid-March, not even Michelle Crawford had heard from Robert Cord. Bob Harkins finally called the Winterhawk offices, and was surprised to learn that Cord had made a $5,000 investment on behalf of the Harkinses, and the payoff was expected soon. A few weeks later, when the returns still had not arrived, the Harkinses asked Cord to lend them the money to buy a 4,700-square-foot house they'd located in Montgomery County. Cord insisted the returns on the $5,000 investment were due any time, and that there would be no loan and no payback.
If the money came in, Cord said, then God wanted the Harkinses to have their residential crisis-pregnancy center. When Bob Harkins asked if God knew it would probably cost $250,000 to $300,000 to buy the house and get it in shape for a maternity home, Cord again told the Harkinses: "Pray, and the money will be there."
Prayer was what the Harkinses did for a living, so they left Robert Cord's office and went on about their business. Another two months passed before Bob and Shirley received a call from Cord's secretary: The closing on the Montgomery County property would take place on June 17. The Harkinses were there at the appointed hour, but Robert Cord was not. Neither was the money Robert Cord had promised.
It was raining hard that day, and there was lightning. After a while, the Harkinses were told that the wire transfer from Texas Coastal failed to go through because of the bad weather. They were told to come back in one week, and the money would be there. No one had to tell them to pray.
Billy Holcomb would later be unable to give a consistent answer to this question: Did the president of Texas Coastal Bank understand that the large deposits wired to Winterhawk's account were coming from investors?
Holcomb would later say that, on some occasions, he "assumed" they were investments in Winterhawk. Other times, he said he didn't know the source of the money, and in that case, what Robert Cord did with it was none of Texas Coastal's business.
Somebody cared, though. On May 8, 1997, Special Agent Tony Smith of the Houston office of the Federal Bureau of Investigation came by the Winterhawk office. Wayne Melson later recalled that Smith seemed hung up on why Cord had no driver's license or social security card. Cord explained that he had spent some recent years in Belize doing Christian outreach, so he used an international driver's license. As for the social security number, Cord simply refused to provide it, saying he had "been burned" by the government.
It's hard to know what Tony Smith took away from the conversation. Cord, however, didn't seem too concerned. When Melson asked him why the FBI was interested in Winterhawk West Indies, Cord replied that it was standard procedure for the feds.
"Hey, it's commonplace," Cord said. "They just want to find out what I'm doing, is all. Everything will be fine."
But Cord had known the FBI was closing in as far back as March, when he heard from a business associate that agents were calling around and asking questions about him. Cord even told Billy Holcomb what he'd heard, and there's no reason to think one or the other hadn't informed Wayne Melson.
The problem was --and it remains a problem for Holcomb and Texas Coastal Bank --nothing changed. Business went on as usual at Winterhawk. In fact, in March alone three different investors wire-transferred a total of $742,000 to the Winterhawk "bond program" account at Texas Coastal Bank. At least two of those investors say they talked to Billy Holcomb before transferring their money, and the banker never mentioned that the FBI might be checking out Cord's business.
Within three weeks of the FBI's visit on May 8, another $1 million in investor money had been wired to Texas Coastal, credited to Winterhawk's account. But for some reason, Robert Cord had decided to do business a little differently. And, as he would later admit, Billy Holcomb didn't stop to wonder why.
The first thing Cord did after Special Agent Smith left his office was pay his lawyer $2,000. Then he had Holcomb transfer $15,000 from Winterhawk's account to his personal account. On May 13, 1997, Cord used $60,000 to buy a new Mercedes-Benz. On May 15, he bought a $280,000 Texas Coastal certificate of deposit, which he then used to secure a $266,000 loan from Holcomb's bank. He did the same thing four days later.
On May 20, Cord paid Wayne Melson a $32,000 commission. May 22 was a particularly busy day: Cord paid $12,500 to two real estate agents who worked for Dorothy Holcomb at Re/Max Gulf Coast; gave another Winterhawk employee $10,000 for the down payment on a Chris Craft 320 boat; and purchased another $280,000 CD from Texas Coastal Bank, which he used to take out a third $266,000 loan.
On May 29, 1997, Cord sent Karisa Tinsley a check for $53,000, which put the Winterhawk account $52,000 in the red. Yet, on May 30, Wayne Melson was paid $75,600 in commissions. Winterhawk's account was overdrawn by $143,000 before another investment came in, this time from a financial consultant in The Woodlands named Steve Roberts.
Roberts was an avid fan of Winterhawk West Indies; he eventually invested well over $1 million on behalf of his clients. Roberts was also one of those people who liked to check on the progress of his investments. He called Wayne Melson on a weekly basis. Indeed, Winterhawk's own records reflect that Steve Roberts made several phone calls to Winterhawk around June 5, 1997, when he wired a $280,000 investment to Texas Coastal. Roberts would later say he wasn't informed by either Cord or Melson that the FBI had been to see them, nor did Roberts learn that Cord had drained the Winterhawk account, largely to secure personal loans.
After Steve Roberts's investment put Winterhawk in the black again, it took Robert Cord just one month to run it $382,000 in the hole. On June 17 --the day the Harkinses were to close on the property in Montgomery County --Winterhawk's account had a balance of less than $4,800. A few days later, Cord used another $280,000 in investors' funds to buy a fourth certificate of deposit from Texas Coastal Bank, then borrowed another $266,000 against it.
Cord wired the money to the title company on June 24, and Bob and Shirley Harkins's prayers were answered. Robert Cord, of course, gave all the glory to God.
"Bob and I would like to tell you how much we appreciate your faithfulness," wrote Shirley Harkins in a letter she sent to Cord, along with a small plaque acknowledging his gift. "It is very rare to see a businessman that values his integrity to make it a priority to keep his word. We pray that you will be blessed beyond measure."
The Harkinses had no way of knowing, of course, that on June 18, less than a week before they got their house, FBI Special Agent Tony Smith had visited Winterhawk again, this time carrying a subpoena. Smith also served Billy Holcomb and Texas Coastal Bank, seeking records of Cord's transactions and account activity.
After that it was only a matter of time before the lie that created Winterhawk West Indies and the ignorance and complicity that sustained it would lead to its collapse.
Wayne Melson sensed it, and a week after the June 18 visit by Tony Smith, he apparently tried to distance himself from what he had to know at that point was a scam. He did it by writing Cord a "letter from your friend" on June 25, 1997. Melson wrote that "for quite some time" he had been trying to talk with Cord about "serious things," specifically how Cord had spent investors' money to buy the Harkinses their house, as well as jet skis and a car for his love interest, Karisa Tinsley. Melson scolded Cord for not waiting on the Winterhawk investments to pay off before spending the money on "those people."
"God will not bless this kind of giving, it is wrong," Melson wrote. "Robert, the only person you owe anything to is Christ. We owe him our lives. We all fall short. But I feel the responsibility as your friend and brother in Christ to say something when I see you falling ... Let's be accountable. I will pray for you. Your friend, Wayne."
It's curious, as well as a bit ironic, that Wayne Melson could handle the day-to-day business of Winterhawk West Indies for six months -- talking to clients, opening mail, verifying the transfer of investor funds -- and then, one week after an FBI subpoena, suddenly discover his boss was misappropriating the money.
Moreover, while Melson was criticizing Cord for not waiting for God to "provide" returns, who did he think was paying his salary? Indeed, Wayne Melson accepted Cord's job offer on the condition that his commissions be paid "up front" rather than after the payoff.
When he wrote his June 25 plea to Cord, Melson had already been paid almost $225,000. That's money he accepted even as he repeatedly told investors that, to get theirs, they just needed to be patient. Melson was so concerned about accountability that he collected another $82,000 in commissions after his letter to Cord. Wayne Melson was so concerned about God's displeasure at Robert Cord's business practices that he didn't quit his job at Winterhawk until the U.S. marshals seized the files and shut down the office in August 1997.
In a one-page letter addressed to "Investors and Brokers," dated August 27, 1997, Melson wrote that Cord had been "dishonest with me and others and I can not [sic] and will not work under such circumstances."
"My duties at Winterhawk were to relay information to you regarding your investment," he wrote. "I only relayed information to you that was diseminated [sic] by Mr. Cord, and [that] I thought were true statements .... Personal friends of my wife and I have invested with Mr. Cord .... We, like them, have been duped."
The federal government didn't catch up to Robert Cord until February 1998. Cord, who was in London with Melson that first week of August 1997, fled to Cancun, then ended up in Belize, where he was finally arrested. On July 30, 1998, Cord agreed to plead guilty to one count of mail fraud and to turn over all assets and property that hadn't been spent or otherwise disposed of. On August 13, 1998, a dozen lawyers, including Assistant U.S. Attorney William Yahner, met at the federal building on Rusk, where a little of the mystery of Robert Cord was revealed.
His real name is Robert Franklin Schoonover, and aside from being 43 years old and an ordained Baptist minister, nothing else he ever told Billy Holcomb, Wayne Melson and the Winterhawk investors was true. Schoonover was, in fact, an escaped federal prisoner when he turned up in the Beaumont area several years ago. He was less than 30 days from completing a sentence for fraudulent use of a social security number when he up and walked away from a halfway house in Spokane.
Schoonover admitted to having been arrested at least two other times for various financial misdeeds. Apparently, though, he really did love Karisa Tinsley, as well as Michelle Crawford and Dorothy Holcomb's stepdaughter, Toni.
Schoonover said he developed much of his financial education, not at a university, but while serving time for theft at Montana State Prison, which had a cache of excess business texts from the local university. Schoonover says he skimmed through 40 or 50 books until he got to the sections on international banking, which he spent months absorbing until he was fluent in the language of the trade.
But Schoonover's real gift as a confidence man is less easily defined. In retrospect, the Holcombs and the Melsons probably view the man who disturbed the delicate equilibrium of their small-town business and social lives as shameless and greedy. But that makes for a bad con artist, Schoonover says. It does, however, make for a good victim.
"Most of them that came to me were either in need or greed, one of the two," Schoonover explained at his August 13 deposition. "And both of them being at the desperation point, they were willing to invest. [But] [a]lmost everybody presents themselves as being benevolent to some cause or someone else. After several phone calls, you end up realizing that most of the money was going into their personal bank accounts ...."
It's likely to be months, or even longer, before the dust clears from the civil forfeiture case against Winterhawk and Texas Coastal Bank that is now rolling through federal court in Houston. The case is a spider's web of claims, cross-claims and third-party plaintiffs and defendants. Some of the investors, while ostensibly fighting the bank and Schoonover, are suing each other.
Meanwhile, Texas Coastal Bank has filed its own claim to recoup approximately $1 million in certificates of deposit that secured bank loans to Robert Cord. The bank's lawyers say they are entitled to the assets because Schoonover never repaid the loans.
Lawyers for investors, however, say Billy Holcomb should have known that purchasing certificates of deposit, only to use them to secure loans, serves no legitimate business purpose. In essence, they say Billy Holcomb was a party to money laundering.
Holcomb denied that in an April 15, 1998 affidavit to the federal court. "At no time," he said, "did I or anyone I know of have any knowledge of any illegal or fraudulent transaction, conduct or activity of Cord, Winterhawk ... or any of their respective agents or representatives."
Yet a review of Winterhawk's account suggests that, while Holcomb may not have known about Schoonover's scam, he certainly helped it along with his banking practices. For example, Winterhawk's account was repeatedly overdrawn, sometimes running six-digit deficits. Yet, even when funds weren't available, Holcomb allowed Schoonover to write checks for cash and transfer money from Winterhawk's account to his personal account. Despite two visits to Winterhawk by the FBI and a federal subpoena, Holcomb continued to allow Schoonover to buy certificates of deposit with investor money, then use it to secure personal loans.
And then there is Dennis Cates, a New York investor. In July 1997, well after the FBI had asked Texas Coastal for Winterhawk's account records, Cates called Billy Holcomb. Holcomb would later say he didn't remember the conversation, but was sure he didn't recommend, one way or the other, that Cates invest in Winterhawk.
Cates recalled his chat with the banker differently. He would later explain that, if Billy Holcomb had told him anything about Robert Cord and Winterhawk --the account deficits, the personal loans, the banker's own business dealings with Cord --he wouldn't have wired $100,000 to Texas Coastal Bank on July 11, 1997.
Holcomb also pleads ignorance about the $500,000 investment Melson made in England, for which Dorothy Holcomb contributed $150,000 from the Re/Max Gulf Coast escrow account. Within days of Winterhawk's seizure, Melson filed a lawsuit in London in the High Court of Justice, Queen's Bench Division, seeking return of the investment he'd made on behalf of his friends. The High Court issued an injunction freezing the funds.
On September 19, 1997, Melson and his counterpart in England, World Wide Resources, appeared to have reached a settlement, whereby World Wide would pay Winterhawk $600,000. The only problem was that, upon return to these shores, the money would no doubt be seized by the U.S attorney's office and added to the assets up for grabs in the civil forfeiture proceedings.
The settlement was apparently delayed because on September 27, Dorothy Holcomb faxed a letter to Wayne and Debbie Melson.
"Bill & I were having our coffee this morning & I brought him up to date about the events related to the London refunding of monies -- we think we need more communication between us so that if or when a 'Mr. Jones' calls, Bill would be more prepared to work as a team to support whatever events are occurring at the time."
The following day, Billy Holcomb faxed a second letter with "a further thought with regard to the pending transfer of funds from London." Holcomb noted that World Wide Resources might be "uncomfortable about not using the name of Winterhawk" when it wired the money to Texas Coastal. Holcomb suggested that World Wide use the name Winterhawk, but direct the money to Melson's account.
"It probably would not matter from the bank's point of view under the transfer being made under Winterhawk as long as your business account number is used," Holcomb wrote. "It would need to be wired to my attention and I could see that it goes into the right account."
On September 29, Melson received a faxed letter from Paul Simms, a London attorney for World Wide. Simms wrote that it was "a pity" that Melson hadn't informed World Wide earlier of Winterhawk's seizure, "as it is a duty ... to make full and frank discovery of all relevant issues."
Simms asked to be put in touch with Winterhawk's attorneys, or "if there are no lawyers appointed, then I would like to be able to contact the FBI direct." The following day, Melson contacted an attorney named Alan Tomlin, who was asked to draw up letters for each of the investors stating how much they had invested and that Melson was representing their interests. It was important, Melson wrote, "that I obtain this letter as soon as possible as ... proceedings have already begun in [an] attempt to retrieve the investment funds."
The "proceedings" Melson referred to were actually a new seizure order for Winterhawk, filed in federal court on October 31, 1997, that sought to retrieve the $500,000 invested with World Wide Resources. Apparently, the feds acted too late. On November 17, 1997, World Wide wired $525,000 to Texas Coastal Bank, where the funds were distributed to the original investors.
While the 5 percent return was much less than expected, the Melsons and the Holcombs could hardly complain. They, unlike almost every other Winterhawk investors, did not lose their money.
In September 1997, after spending $18,000 on renovations, Shirley and Bob Harkins moved into a garage apartment adjacent to the house Robert Cord bought them. They were preparing to start work on the house itself when the FBI showed up and seized the property.
Perhaps the Harkinses are the only true victims of the Winterhawk scam. At least it could be argued that anyone who believes they can invest a sum of money and have it come back doubled in 30 days is asking to be taken.
But Bob and Shirley Harkins had long been praying for what they needed. That it finally came in the name of Robert Cord is a quirk of fate the Harkinses are not totally prepared to denounce. After all, they could never afford the house they have now, and though they probably won't be able to keep it, there's still a chance.
According to the Harkinses' lawyer, Norman Van Pelt, the best thing that could happen is that the judge sitting on the forfeiture case will decide Bob and Shirley are "innocent owners," and award them the property. That may not go over well with the other investors, who will ask that the house be sold and the proceeds disbursed among them.
The other option is for the Harkinses to raise $150,000 in donations and buy the house. Of course, that's going to take a lot more praying.
"We could move out and just forget this whole thing ever happened," Shirley Harkins says. "But that's not true faith."
E-mail Brian Wallstin at email@example.com.