Page 2


OBSERVER A Journal of Free Voices A Window to the South September 3,1976 50e One juicy bank scandal Austin, San Antonio The closing of the Citizens State Bank in Carrizo Springs is the most fascinating bank failure since Sharpstown. This time there aren’t many politicians involved, but there’s enough mystery and intrigue to make the evolving plot as addictive as a soap opera. The show should be called “Enrique Salinas, Enrique Salinas.” The star is an Eagle Pass resident who rivals Clinton Manges as South Texas’ leading man of mystery. \(Manges, by the way, comes into the story via his San Antonio Within a space of six months, Enrique M. Salinas purchased minority or controlling interest in at least six Texas banks Citizens State in Carrizo Springs \(Dimmit Security State Bank of McCamey \(Upton Very little is known about Salinas. He appears to be in his mid-thirties and he may have both American and Mexican citizenships. Arthur Mitchell of Austin, who is Salinas’ attorney, maintains that his client is worth $25-30 million, with a goodly portion of his holdings in Mexican land and cattle. But state banking examiners say that Salinas gave them a financial statement dated Feb. 28, 1976, which indicated a net worth of only $8.9 million. Salinas bought his bank stock through conventional transactions. In the May, 1976, Union State purchase, for example, he \(and possibly some as yet unknown showed a financial statement that the bank management felt was adequate to warrant a $600,000 loan to purchase 22,632 shares of Union’s common stock from Charles Gary, Dallas trustee for the stock owners. The collateral Salinas put up for the loan was the stock itself. Groos got a first lien on the stock. Salinas paid some of the $600,000 to Gary and also presented him with a $277,520 promissory note secured by a second lien on the stock. \(Gary is now suing Groos and Salinas because Groos allowed Salinas to turn the stock over to the First National Bank of San Antonio as security keep up his payments because his stock was sold at auction in July. Salinas probably bought all of his banks with no capital outlay for the stock, although in some cases the financial condition of the banks may have required some monetary infusion. In each case, a large bank was happy to make the loan because it could make money not only on the interest payments but also on deposits the small bank subsequently placed in the large bank. \(Small rural banks set up a correspondence relationship with larger banks which act as a The Alamo National Bank in San Antonio partially financed Salinas’ purchase of Citizens State Bank from a San Antonio investment group in November of 1975 \(see to Alamo July 2, after bank examiners closed Citizens on June 28. Salinas assumed an $800,000 note originally made by Dallas International Bank to the San Antonio group when it purchased controlling interest in the Coppell Bank in April of this year. The San Antonians bought the Coppell stock from a group that got the bank chartered two years ago. This group included former Lt. Gov. Ben Barnes and his Brownwood business partner, Herman Bennett; Jack Pilon, a Brownwood bank executive; and Larry Temple, an Austin p.r. man who worked for both Gov. John Connally and Lyndon Johnson. Barnes told The Dallas Morning News on Aug. 8 that Salinas still owes his group $200,000. Early in August, DIB foreclosed on Salinas’ note and sold his Coppell stock back to Barnes and friends. The bank was apparently none too happy with the bank official who handled Salinas’ loans. John T. Hanley, III, an ‘executive vice president at DIB, was fired in August, reportedly for allowing Salinas’ loans to go beyond a maximum approved by the bank. Citizens State was in shaky financial condition when Salinas bought it from the San Antonio group. In fact, the state banking department was watching it so closely that some observers were surprised when a bank examiner wasn’t placed on the Citizens board of directors to keep the bank in line. The new owner certainly needed supervision. Salinas brought in a new bank staff and proceeded within the space of five months to loan himself, his family, and his businesses $2.1 million, much of it unsecured. Despite the fact that the bank was prohibited from loaning more than $300,000 to any individual, a number of Salinas’ relatives and friends got more than the legal limit, and Salinas himself probably benefited from a goodly number of these loans. Included in the transactions questioned by bank examiners were: k 1111 N1 2314 9 s $ 1L ,1-1\( 12S i_ r ’41 s t_, 555\( 7788899 -4` 90 $$$223tr7 .334 i667778889 ri: jr .L/C tin 11111111\(10. 11